PREDICTION MARKETS
Prediction Markets
Prediction markets turn expectations about future events into prices that can be interpreted as market-implied probabilities. We examine how those prices change, where markets disagree, and what the data can and cannot tell us about the events being forecast.
THE FUNDAMENTALS
Understanding Prediction Markets
Prediction markets allow participants to trade contracts tied to future events. Contract prices can provide a rough indication of how the market assesses an outcome’s likelihood, but that interpretation depends on the contract’s terms, trading activity, fees, and market structure. A price is informative, not a guarantee.
MARKET MOVEMENTS
Why Market Probabilities Change
Prediction-market prices respond to new information, changes in trading activity, and shifts in participants’ expectations. A sharp move may reflect a meaningful development, thin liquidity, or a combination of factors. Understanding the move requires looking beyond the price alone and checking what changed, when it changed, and how actively the market traded.
ACCURACY & CONTEXT
What Market Probabilities Can Tell Us
A market can assign a high probability to an outcome that ultimately does not occur, and a single correct forecast does not prove that a market is consistently accurate. Evaluating forecasts requires comparing probabilities with outcomes across many events, accounting for timing, market conditions, and the quality of the available data.
- How Accurate Are Prediction Markets?
- Why One Correct Prediction Doesn’t Prove Accuracy