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The stylized facts of prediction markets: analysis of price changes

The stylized facts of prediction markets: analysis of price changes
The stylized facts of prediction markets: analysis of price changes
Prediction markets are a powerful tool to make accurate predictions about the
outcome of an event and, for this reason, they attract the interest of researchers
and practitioners alike. To date, there exist no means of validation for quantitative
models of prediction markets. To address this shortcoming, in this paper
we compile a list of empirical regularities (stylized facts) of price changes we
find by analyzing daily price changes from 3385 prediction markets on political
events, a data set provided by PredictIt. We find that price changes in prediction
markets show characteristics similar to emerging markets, with some small
differences.
0378-4371
Restocchi, Valerio
98f77fd1-d09f-4e24-932d-9c618f4307ab
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Gerding, Enrico
d9e92ee5-1a8c-4467-a689-8363e7743362
Restocchi, Valerio
98f77fd1-d09f-4e24-932d-9c618f4307ab
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Gerding, Enrico
d9e92ee5-1a8c-4467-a689-8363e7743362

Restocchi, Valerio, McGroarty, Frank and Gerding, Enrico (2018) The stylized facts of prediction markets: analysis of price changes. Physica A: Statistical Mechanics and its Applications. (In Press)

Record type: Article

Abstract

Prediction markets are a powerful tool to make accurate predictions about the
outcome of an event and, for this reason, they attract the interest of researchers
and practitioners alike. To date, there exist no means of validation for quantitative
models of prediction markets. To address this shortcoming, in this paper
we compile a list of empirical regularities (stylized facts) of price changes we
find by analyzing daily price changes from 3385 prediction markets on political
events, a data set provided by PredictIt. We find that price changes in prediction
markets show characteristics similar to emerging markets, with some small
differences.

Text The stylised facts of prediction markets: analysis of price changes - Accepted Manuscript
Restricted to Repository staff only until 24 September 2019.
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Accepted/In Press date: 24 September 2018

Identifiers

Local EPrints ID: 423710
URI: https://eprints.soton.ac.uk/id/eprint/423710
ISSN: 0378-4371
PURE UUID: e75caba1-1146-4363-8a96-86ac86147792
ORCID for Frank McGroarty: ORCID iD orcid.org/0000-0003-2962-0927

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Date deposited: 27 Sep 2018 16:30
Last modified: 06 Oct 2018 00:36

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Contributors

Author: Valerio Restocchi
Author: Frank McGroarty ORCID iD
Author: Enrico Gerding

University divisions

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