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Prediction Markets for Economic Forecasting

Erik Snowberg (), Justin Wolfers () and Eric Zitzewitz ()
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Erik Snowberg: California Institute of Technology

No 6720, IZA Discussion Papers from Institute for the Study of Labor (IZA)

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.

Keywords: prediction markets; forecasting (search for similar items in EconPapers)
JEL-codes: C5 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for
Date: 2012-07
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Published in: Handbook of Economic Forecasting, 2013, 2A, 657-684

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Related works:
Chapter: Prediction Markets for Economic Forecasting (2013) Downloads
Working Paper: Prediction Markets for Economic Forecasting (2012) Downloads
Working Paper: Prediction Markets for Economic Forecasting (2012) Downloads
Working Paper: Prediction Markets for Economic Forecasting (2012) Downloads
Working Paper: Prediction Markets for Economic Forecasting (2012) Downloads
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