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Statistical properties of volumes and calendar effects in prediction markets

Statistical properties of volumes and calendar effects in prediction markets
Statistical properties of volumes and calendar effects in prediction markets
Prediction markets have proven to be an exceptional tool for harnessing the "wisdom of the crowd", consequently making accurate forecasts about future events. Motivated by the lack of quantitative means of validations for models of prediction markets, in this paper we analyze the statistical properties of volume as well as the seasonal regularities (i.e., calendar effects) shown by volume and price. To accomplish this, we use a set of 3385 prediction market time series provided by PredictIt. We find that volume, with the exception of its seasonal regularities, possesses different properties than what is observed in financial markets. Moreover, price does not seem to exhibit any calendar effect. These findings suggest a significant difference between prediction and financial markets, and offer evidence for the need of studying prediction markets in more detail.
0378-4371
1150-1160
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 (2019) Statistical properties of volumes and calendar effects in prediction markets. Physica A: Statistical Mechanics and its Applications, 253, 1150-1160. (doi:10.1016/j.physa.2019.03.096).

Record type: Article

Abstract

Prediction markets have proven to be an exceptional tool for harnessing the "wisdom of the crowd", consequently making accurate forecasts about future events. Motivated by the lack of quantitative means of validations for models of prediction markets, in this paper we analyze the statistical properties of volume as well as the seasonal regularities (i.e., calendar effects) shown by volume and price. To accomplish this, we use a set of 3385 prediction market time series provided by PredictIt. We find that volume, with the exception of its seasonal regularities, possesses different properties than what is observed in financial markets. Moreover, price does not seem to exhibit any calendar effect. These findings suggest a significant difference between prediction and financial markets, and offer evidence for the need of studying prediction markets in more detail.

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Submitted date: 2018
Accepted/In Press date: 23 March 2019
e-pub ahead of print date: 29 March 2019
Published date: 1 June 2019

Identifiers

Local EPrints ID: 425432
URI: https://eprints.soton.ac.uk/id/eprint/425432
ISSN: 0378-4371
PURE UUID: 0502c08d-877e-4446-834f-f1876a436837
ORCID for Frank McGroarty: ORCID iD orcid.org/0000-0003-2962-0927
ORCID for Enrico Gerding: ORCID iD orcid.org/0000-0001-7200-552X

Catalogue record

Date deposited: 19 Oct 2018 16:30
Last modified: 20 Jul 2019 01:00

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