Political Shocks and Price Discovery in Prediction Markets: Evidence from the 2024 U.S. Presidential Election

Kwok Ping Tsang and Zichao Yang

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Abstract: Using transaction-level trade data from Polymarket's 2024 U.S. presidential election market, we study how prediction markets process shocks. We analyze three events: the Biden-Trump debate, the assassination attempt on Trump, and Biden's dropout. Trading rises after each shock, especially among incumbent traders with pre-event exposure against a Trump victory, who are also more likely to flip positions. Price adjustment differs across shocks. The debate-induced price jump largely reverses, the assassination-attempt repricing persists, and Biden's dropout triggers two-sided trading with little net price change. These patterns link post-news price dynamics to liquidity and disagreement about how shocks map into election odds.

Date: 2026-03, Revised 2026-03
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