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How accurate do markets predict the outcome of an event? The Euro 2000 soccer championships experiment

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  • Carsten Schmidt

    ()

  • Axel Werwatz

    ()

Abstract

For the Euro 2000 Soccer Championships an experimental asset market was conducted, with traders buying and selling contracts on the winners of individual matches. Market-generated probabilities are compared to professional bet quotas, and factors that are responsible for the quality of the market prognosis are identified. The comparison shows, that the market is more accurate than the random predictor and slightly better than professional bet quotas, in the sense of mean square error. Moreover, the more certain the market predicts the outcome of an event the more accurate is the prediction.

Suggested Citation

  • Carsten Schmidt & Axel Werwatz, 2002. "How accurate do markets predict the outcome of an event? The Euro 2000 soccer championships experiment," Papers on Strategic Interaction 2002-09, Max Planck Institute of Economics, Strategic Interaction Group.
  • Handle: RePEc:esi:discus:2002-09
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    References listed on IDEAS

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    1. Forsythe, Robert & Forrest Nelson & George R. Neumann & Jack Wright, 1992. "Anatomy of an Experimental Political Stock Market," American Economic Review, American Economic Association, vol. 82(5), pages 1142-1161, December.
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    Cited by:

    1. Jens Grossklags & Carsten Schmidt, 2002. "Artificial Software Agents on Thin Double Auction Markets - A Human Trader Experiment," Papers on Strategic Interaction 2002-45, Max Planck Institute of Economics, Strategic Interaction Group.
    2. Stefan Luckner & Christof Weinhardt, 2007. "How to pay traders in information markets? Results from a field experiment," Artefactual Field Experiments 00107, The Field Experiments Website.

    More about this item

    Keywords

    experimental asset markets; prognosis; market efficiency;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G1 - Financial Economics - - General Financial Markets

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