Business and Finance Information

Archive for July, 2009

Financial news is dominated by a narrative on the various asset markets in the world. Turn on CNBC and in seconds you’ll be informed of the current state of stocks trading on the NYSE. Wait a little longer and see the stock to a stranger. In addition to these markets for assets that trade as a kind of prediction markets, the probabilities of individual events known. Here, we focus on this relatively new phenomenon.

Prediction markets, also called an idea of the future in order to assign a value or create the risk of penalties. The bank created the company, whose final value is tied to a particular event (eg will Hillary Clinton win the Democratic nomination?) Or a parameter (such as opening sales at the box office for “Sex and the City “). Current market prices are interpreted estimates of the probability of the event or the expected value of the parameter. The prediction markets are structured, and the exchange of Paris without risk to the bookmaker. At first glance, the market is like predicting the NASDAQ market or commodity futures, by common measures such as the offer price, sale price, open interest and volume of trade. The information, provided the price is considered by many researchers as a fair and reasonable estimate reliable effects expected. A procurement contracts for predicting the most popular is political. An academic market forecast by the University of Iowa is sponsored by a presidential election since 1988 with excellent results. The average error in the estimation of votes is 1.4%.

The Gallup poll has an average error rate of 2.0% over the same period. Markets function prediction are in good agreement with the production of results, even if it does not serve as a guide to voting. For example, bookmakers offer the Australian market to the political career of the neighborhood (non-voting) and the resulting difference is very clear. The volume of transactions in the market has not yet expired, to be realistic hedging instruments for investors. However, there is a growing interest for a number of innovative contracts market forecasts. The main www.intrade.com Intrade prediction markets in the United Kingdom. A wide range of economic and political proposals that are negotiable on their website. Intrade has a contract that investors to be able to invest the likelihood that the United States into recession in 2008. Read the rest of this entry »