Prediction Markets
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Date: 10-18-2004
Start Time:
6:00pm
End Time: 7:30pm
Speaker: Justin Wolfers, Business and Public Policy Dept, The Wharton School
Location: 412 Shapiro CEPSR, Davis Auditorium
ABSTRACT
We analyze the extent to which simple markets can be used to aggregate dispersed information into efficient forecasts of unknown future events. Drawing together data from a range of prediction contexts from financial markets, sports, politics and entertainment, we show that market-generated forecasts are typically fairly accurate, and they outperform most moderately sophisticated benchmarks. Carefully designed contracts can yield insight into the market's expectations about not only probabilities, means and medians, and also uncertainty about these parameters. Moreover, conditional markets can effectively reveal the market's beliefs about regression coefficients, although we still have the usual problem of disentangling correlation from causation. We discuss a number of market design issues and highlight domains in which prediction markets are most likely to be useful.
BIO
Justin Wolfers is assistant professor of economics in the Business and Public Policy Department at the Wharton School. He is a visiting scholar with the San Francisco Federal Reserve, and a Research Fellow with the National Bureau of Economic Research. He was previous an Assistant Professor at Stanford's Graduate School of Business.
Professor Wolfers has a PhD in Economics from Harvard University, and his undergraduate economics degree is from the University of Sydney. His research agenda covers labor economics, macroeconomics, social policy and behavioral finance, and is marked by an attempt to marry economics with political science, sociology, psychology, and careful empirical analysis.
Prior to his career in academia, Dr. Wolfers was an economist at the Reserve Bank of Australia, and supported himself through university by working for a sportsbookie in his native Australia.