Agenda

26 Mar 2025 12:15

Pietro Dindo

Meeting Room 1, San Giobbe Economics Campus + online

Pietro Dindo (Ca' Foscari University of Venice) - On the Accuracy of Prediction Markets

Abstract:

This paper investigates the conditions under which a selection argument supports the accuracy of prediction markets. In these markets, traders bet on the realization of binary outcomes, such as presidential elections, political or socio-economic events, or sports competitions. Bet prices are expected to reflect event odds. We develop a dynamic model of trading in prediction markets where agents receive public signals to update their beliefs about the probability of the binary outcome and hold heterogeneous priors. First, incorporating heterogeneous priors aligns the model with empirical evidence on trading volume and momentum in prediction markets. Second, as signals become more frequent, bet prices reflect the beliefs of traders who are most accurate in predicting signals rather than outcomes. Therefore, market selection ensures price accuracy only when the ability to predict signals translates into accurate outcome predictions.

The seminar can be attended also remotely, connecting to ZOOM.

Link Zoom: bit.ly/insem-2425
ID riunione:  880 2639 9452
Passcode: InSem-2425

Language

The event will be held in English

Organized by

Department of Economics (InSeminars)

Link

http://bit.ly/insem-2425

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