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Friday, November 06, 2009 - 8:00am - 5:00pm @ The Gleacher Center, Chicago, IL

 

What are Prediction Markets?  Also known as information markets, decision markets, idea futures, and virtual markets, prediction markets are speculative markets created for the purpose of making predictions. Assets are created whose final cash value is tied to a particular event, outcome or parameter (e.g., total sales next quarter). The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter.  People who buy low and sell high are rewarded for improving the market prediction, while those who buy high and sell low are punished for degrading the market prediction. Evidence so far suggests that prediction markets are at least as accurate as other institutions predicting the same events with a similar pool of participants.  One of the oldest and most famous is the University of Iowa's Iowa Electronic Market. It has been predicting the results of American presidential elections since 1988 with greater accuracy than polling companies. Prediction markets were championed in James Surowiecki's 2004 book The Wisdom of Crowds. Prediction markets are speculated to be useful decision support tools for corporations.