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

  • Carsten Schmidt


  • Axel Werwatz


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.

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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2002-09.

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Length: 22 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:esi:discus:2002-09
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  1. John M. Gandar & William H. Dare & Craig R. Brown & Richard A. Zuber, 1998. "Informed Traders and Price Variations in the Betting Market for Professional Basketball Games," Journal of Finance, American Finance Association, vol. 53(1), pages 385-401, 02.
  2. Forsythe, Robert & Lundholm, Russell, 1990. "Information Aggregation in an Experimental Market," Econometrica, Econometric Society, vol. 58(2), pages 309-47, March.
  3. Gandar, John, et al, 1988. " Testing Rationality in the Point Spread Betting Market," Journal of Finance, American Finance Association, vol. 43(4), pages 995-1008, September.
  4. Berlemann, Michael & Schmidt, Carsten, 2001. "Predictive accuracy of political stock markets: Empirical evidence from a European perspective," SFB 373 Discussion Papers 2001,57, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  5. Forsythe, Robert & Rietz, Thomas A. & Ross, Thomas W., 1999. "Wishes, expectations and actions: a survey on price formation in election stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 39(1), pages 83-110, May.
  6. Gray, Philip K & Gray, Stephen F, 1997. " Testing Market Efficiency: Evidence from the NFL Sports Betting Market," Journal of Finance, American Finance Association, vol. 52(4), pages 1725-37, September.
  7. Plott, Charles R & Sunder, Shyam, 1988. "Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets," Econometrica, Econometric Society, vol. 56(5), pages 1085-1118, September.
  8. Roger C. Vergin & Michael Scriabin, 1978. "Winning Strategies for Wagering on National Football League Games," Management Science, INFORMS, vol. 24(8), pages 809-818, April.
  9. 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 1142-61, December.
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