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Political Shocks and Price Discovery in Prediction Markets: Evidence from the 2024 U.S. Presidential Election

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  • Kwok Ping Tsang
  • Zichao Yang

Abstract

Using transaction-level trade data from Polymarket's 2024 U.S. presidential election market, we study how prediction markets process shocks. We analyze three events: the Biden-Trump debate, the assassination attempt on Trump, and Biden's dropout. Trading rises after each shock, especially among incumbent traders with pre-event exposure against a Trump victory, who are also more likely to flip positions. Price adjustment differs across shocks. The debate-induced price jump largely reverses, the assassination-attempt repricing persists, and Biden's dropout triggers two-sided trading with little net price change. These patterns link post-news price dynamics to liquidity and disagreement about how shocks map into election odds.

Suggested Citation

  • Kwok Ping Tsang & Zichao Yang, 2026. "Political Shocks and Price Discovery in Prediction Markets: Evidence from the 2024 U.S. Presidential Election," Papers 2603.03152, arXiv.org, revised Mar 2026.
    • Handle: RePEc:arx:papers:2603.03152
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