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 21, 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 21, 2014).

Share This




More Science & Society News

Thursday, August 21, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Cadavers, a Teen, and a Medical School Dream

Cadavers, a Teen, and a Medical School Dream

AP (Aug. 21, 2014) — Contains graphic content. He's only 17. But Johntrell Bowles has wanted to be a doctor from a young age, despite the odds against him. He was recently the youngest participant in a cadaver program at the Indiana University NW medical school. (Aug. 21) Video provided by AP
Powered by NewsLook.com
Families Can Now Ask Twitter To Remove Photos Of Deceased

Families Can Now Ask Twitter To Remove Photos Of Deceased

Newsy (Aug. 20, 2014) — In the wake of a high-profile harassment case, Twitter says family members can ask for photos of dying or dead relatives to be taken down. Video provided by Newsy
Powered by NewsLook.com
Reasons Why Teen Birth Rates Are At An All-Time Low

Reasons Why Teen Birth Rates Are At An All-Time Low

Newsy (Aug. 20, 2014) — A CDC report says birth rates among teenagers have been declining for decades, reaching a new low in 2013. We look at several popular explanations. Video provided by Newsy
Powered by NewsLook.com
Do More Wedding Guests Make A Happier Marriage?

Do More Wedding Guests Make A Happier Marriage?

Newsy (Aug. 20, 2014) — A new study found couples who had at least 150 guests at their weddings were more likely to report being happy in their marriages. Video provided by Newsy
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