Featured Research

from universities, journals, and other organizations

Prediction Markets Strong At Forecasting US Presidential Elections, Says New Management Insights

Date:
August 18, 2008
Source:
Institute for Operations Research and the Management Sciences
Summary:
A case study of the 2004 US Presidential election by researchers at Yale shows that prediction markets are proving to be a strong forecasting tool, one that may have an impact in calling the current presidential contest between Democrat Senator Barack Obama and Republican Senator John McCain, according to the Management Insights feature in the current issue of Management Science.

A case study of the 2004 U.S. Presidential election by researchers at Yale shows that prediction markets are proving to be a strong forecasting tool, one that may have an impact in calling the current presidential contest between Democrat Senator Barack Obama and Republican Senator John McCain, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®).

"Modeling a Presidential Prediction Market" is by M. Keith Chen, Jonathan E. Ingersoll, Jr., and Edward H. Kaplan of the Yale School of Management.

In their study, the authors relate that many firms are establishing internal prediction markets, while public prediction markets increasingly cover all manner of business, economic, and political events. Managers must decide whether to treat these markets seriously, especially when they price complex, interdependent events.

The authors' case study of the 2004 presidential election market suggests that they should. They explore the consistency of security prices associated with presidential election contracts that traded in the Intrade.com prediction market during the run up to the 2004 presidential election. In that prediction market, traders placed bets on various election outcomes such as "George Bush will win both Florida and Ohio" and "George Bush will be elected President of the United States."

The authors find that these prices were mutually consistent with the rules governing the Electoral College, and that traders appeared to quickly and efficiently assimilate new information as it unfolded over the campaign.

Turning to business, the authors suggest that prediction markets can be a valuable tool for managers who face decisions that may depend on the outcome of complex and interdependent events. Established prediction markets will likely do a good job assessing events in which interest is widespread. For events of narrower interest, establishing an internal prediction market may be an effective way to aggregate information within the firm.


Story Source:

The above story is based on materials provided by Institute for Operations Research and the Management Sciences. Note: Materials may be edited for content and length.


Journal Reference:

  1. Chen et al. Modeling a Presidential Prediction Market. Management Science, 2008; 54 (8): 1381 DOI: 10.1287/mnsc.1080.0872

Cite This Page:

Institute for Operations Research and the Management Sciences. "Prediction Markets Strong At Forecasting US Presidential Elections, Says New Management Insights." ScienceDaily. ScienceDaily, 18 August 2008. <www.sciencedaily.com/releases/2008/08/080815130423.htm>.
Institute for Operations Research and the Management Sciences. (2008, August 18). Prediction Markets Strong At Forecasting US Presidential Elections, Says New Management Insights. ScienceDaily. Retrieved August 28, 2014 from www.sciencedaily.com/releases/2008/08/080815130423.htm
Institute for Operations Research and the Management Sciences. "Prediction Markets Strong At Forecasting US Presidential Elections, Says New Management Insights." ScienceDaily. www.sciencedaily.com/releases/2008/08/080815130423.htm (accessed August 28, 2014).

Share This




More Science & Society News

Thursday, August 28, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Uzi Shooting Spurs Debate Over Children Using Guns

Uzi Shooting Spurs Debate Over Children Using Guns

Newsy (Aug. 27, 2014) — A 9-year-old girl fatally shot her instructor after losing control of her Uzi at a firing range. Critics question why she had the gun to begin with. Video provided by Newsy
Powered by NewsLook.com
WHO Calls for Ban on E-Cigarette Sales to Minors

WHO Calls for Ban on E-Cigarette Sales to Minors

AFP (Aug. 26, 2014) — The World Health Organization called Tuesday on governments should ban the sale of e-cigarettes to minors, warning that they pose a "serious threat" to foetuses and young people. Duration: 01:44 Video provided by AFP
Powered by NewsLook.com
ICREACH: NSA Built A Google Of Americans' Info

ICREACH: NSA Built A Google Of Americans' Info

Newsy (Aug. 26, 2014) — The Intercept published an article Monday profiling what the online publication called NSA's very own Google of personal data. Video provided by Newsy
Powered by NewsLook.com
Activists Urge NYC Mayor to Ban Carriage Horses

Activists Urge NYC Mayor to Ban Carriage Horses

AP (Aug. 26, 2014) — A group of New Yorkers are putting Mayor Bill de Blasio on notice for what they say is reneging on his campaign promise to ban carriage horses. They rallied Tuesday near the mayor's Gracie Mansion home. (Aug. 26) Video provided by AP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins