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Title:How prediction markets can save event studies PDF Logo
Authors:Snowberg, Erik
Wolfers, Justin
Zitzewitz, Eric
Issue Date:2011
Series/Report no.:CESifo working paper: Public Choice 3434
Abstract:This review paper articulates the relationship between prediction market data and event studies, with a special focus on applications in political economy. Event studies have been used to address a variety of political economy questions - from the economic effects of party control of government to the importance of complex rules in congressional committees. However, the results of event studies are notoriously sensitive to both choices made by researchers and external events. Specifically, event studies will generally produce different results depending on three interrelated things: which event window is chosen, the prior probability assigned to an event at the beginning of the event window, and the presence or absence of other events during the event window. In this paper we show how each of these may bias the results of event studies, and how prediction markets can mitigate these biases.
Subjects:prediction markets
event studies
political economy
JEL:A20
C58
D72
H50
G14
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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