WANNA BET THERE WILL BE WAR? A TIME-SERIES ANALYSIS OF PREDICTION MARKETS DURING THE LIBYA CONFLICT 2011

Sebastian Matthias Woerle

Journal of Prediction Markets, 2013, vol. 7, issue 3, 1-28

Abstract: This paper tests the explanatory power of an online Prediction market on the ousting of Muammar Gaddafi as Libya’s leader during the uprising in 2011. Based on the theory of efficient markets and collective intelligence, it employs a GARCH time-series analysis and an event study of Intrade data to test the impact of events on market performance and trading volume. The market distinguishes sensibly between relevant and irrelevant news for the outcome of the conflict and prices them in at a surprising speed. Some support for short-term anticipative trading and price performance is found. The analyzed market is found to be semi-strong efficient and works as an evaluative tool in international conflict.

Keywords: time-series; conflict; prediction market(s); forecasting; international relations; event study (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2013
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