Event Studies in Real- And Play-Money Prediction Markets

Abstract

Event study methodology is a powerful procedure to quantify the impact of events and managerial decisions such as new product announcements on the value of a publicly traded company. However, for many events, appropriate financial data may not be available, either because suitable securities are not traded on financial markets or confounding effects limit the insights from financial data. In such instances, prediction markets could potentially provide the necessary data for an event study. Prediction markets are electronic markets where participants can trade stocks whose prices reflect the outcome of future events, e.g. election outcomes, sports results, new product sales or internal project deadlines. One key distinction between different prediction market applications is whether they require real money investments or play-money investment with non-monetary incentives for traders. Thus, the goal of this paper is to compare prediction markets’ ability to conduct event studies with respect to these two different incentive schemes. We empirically test the applicability of event study methodology in real-money vs. play-money prediction markets with two data sets. We show that event studies with prediction markets deliver robust and valid results with both incentive schemes.

Sports lottery game prediction system development and evaluation on social networks

“…Prediction markets, which provide electronic markets for users trading stocks, provide an index for an event study. The contract price reflects the outcome of future events (Slamka et al, 2008). The time is money that a user can buy a low price early 767 Sports lottery game prediction system based on accurate prediction; hence, that particular user will be rewarded for an accurate event prediction.…”

“…The time is money that a user can buy a low price early 767 Sports lottery game prediction system based on accurate prediction; hence, that particular user will be rewarded for an accurate event prediction. Users have to collect additional useful information to win high rewards among a similar pool of participants (Tung et al, 2011a;Slamka et al, 2008). An official event exchange website xFuture.org was established to predict the future of markets including finance, politics, sports, and technology (especially for election prediction).…”

“…They attributed a 97.72 per cent level of confidence to the accurate prediction group, but only a 19.58 per cent level of confidence to the inaccurate prediction group . Slamka et al (2008) tested the applicability of future events in real-money and play-money prediction markets. They revealed that both incentive schemes generate robust and valid results.…”

“…• Three types of prediction method, vote, future event (Slamka et al, 2008), and odds, are used to support users with making decisions and to increase the win rate in betting, particularly predictions for bets in the TSL. The statistical methods are used in prediction to elaborate the social power that reduces the bias or the effect by small amount of members (Gail et al, 1984;Albert et al, 2014).…”