The Informational Content of the Limit Order Book: An Empirical Study of Prediction Markets

Joachim Groeger

Papers from arXiv.org

Abstract: In this paper I empirically investigate prediction markets for binary options. Advocates of prediction markets have suggested that asset prices are consistent estimators of the "true" probability of a state of the world being realized. I test whether the market reaches a "consensus." I find little evidence for convergence in beliefs. I then determine whether an econometrician using data beyond execution prices can leverage this data to estimate the consensus belief. I use an incomplete specification of equilibrium outcomes to derive bounds on beliefs from order submission decisions. Interval estimates of mean beliefs cannot exclude aggregate beliefs equal to 0.5.

Date: 2016-09
New Economics Papers: this item is included in nep-fmk and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1609.03471 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1609.03471

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().