Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/62505 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 6720
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Prediction markets - markets used to forecast future events - have been used to accurately forecast the outcome of political contests, sporting events, and, occasionally, economic outcomes. This chapter summarizes the latest research on prediction markets in order to further their utilization by economic forecasters. We show that prediction markets have a number of attractive features: they quickly incorporate new information, are largely efficient, and impervious to manipulation. Moreover, markets generally exhibit lower statistical errors than professional forecasters and polls. Finally, we show how markets can be used to both uncover the economic model behind forecasts, as well as test existing economic models.
Subjects: 
prediction markets
forecasting
JEL: 
C5
G14
Document Type: 
Working Paper

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