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How manipulable are prediction markets?

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  • Itzhak Rasooly
  • Roberto Rozzi

Abstract

In this paper, we conduct a large-scale field experiment to investigate the manipulability of prediction markets. The main experiment involves randomly shocking prices across 817 separate markets; we then collect hourly price data to examine whether the effects of these shocks persist over time. We find that prediction markets can be manipulated: the effects of our trades are visible even 60 days after they have occurred. However, as predicted by our model, the effects of the manipulations somewhat fade over time. Markets with more traders, greater trading volume, and an external source of probability estimates are harder to manipulate.

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  • Itzhak Rasooly & Roberto Rozzi, 2025. "How manipulable are prediction markets?," Papers 2503.03312, arXiv.org.
    • Handle: RePEc:arx:papers:2503.03312
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    References listed on IDEAS

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    7. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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