An Empirical Study of Dynamic Pari-mutuel Markets: Evidence from the Tech Buzz Game
نویسندگان
چکیده
A dynamic pari-mutuel market (DPM) is a hybrid between a continuous double auction (CDA) and a pari-mutuel market. Like a CDA, a DPM incentivizes traders to reveal their information early. Like a pari-mutuel market, a DPM has infinite liquidity, allowing trades at any time. In this paper, we examine empirical questions related to DPMs: Do prices in DPMs predict events of interests? How do traders behave in DPMs? Leveraging a data set from the Yahoo!/O’Reilly Tech Buzz Game, a live system using the DPM, we show that prices offer informative forecasts of future event trends. At the agent level, we find that on average human traders outperform robot traders who randomly place trades. Those human traders who are seemingly more rational, buying when the implied market probability is low and selling when it is high, obtain higher profit on average than those who appear less rational. We examine other aspects of the game, including incentives to manipulate the market.
منابع مشابه
Pari-Mutuel Markets: Mechanisms and Performance
Recently, there has been an increase in the usage of centrally managed markets which are run by some form of pari-mutuel mechanism. A parimutuel mechanism is characterized by the ability to shield the market organizer from financial risk by paying the winners from the stakes of the losers. The recent introduction of new, modified pari-mutuel methods has spurred the growth of prediction markets ...
متن کامل. T R ] 1 4 Fe b 20 09 A Unified Framework for Dynamic Pari - Mutuel Information Market Design
Recently, several new pari-mutuel mechanisms have been introduced to organize markets for contingent claims. Hanson [7] introduced a market maker derived from the logarithmic scoring rule, and later Chen & Pennock [5] developed a cost function formulation for the market maker. On the other hand, the SCPM model of Peters et al. [9] is based on ideas from a call auction setting using a convex opt...
متن کاملA Unified Framework for Dynamic Prediction Market Design
Recently, coinciding with and perhaps driving the increased popularity of prediction markets, several novel pari-mutuel mechanisms have been developed such as the logarithmic market-scoring rule (LMSR), the cost-function formulation of market makers, utility-based markets, and the sequential convex pari-mutuel mechanism (SCPM). In this work, we present a convex optimization framework that unifi...
متن کاملA Study of the Pari-Mutuel Model from the Point of View of Imprecise Probabilities
The Pari-Mutuel model is a distortion model that has its origin in horse racing. Since then, it has been applied in many different fields, such as finance or risk analysis. In this paper we investigate the properties of the Pari-Mutuel model within the framework of Imprecise Probabilities. Since a Pari-Mutuel model induces (2-monotone) coherent lower and upper probabilities, we investigate its ...
متن کاملComplexity as a Guide to Understanding Decision Bias: A Contribution to the Favorite-Longshot Bias Debatey
This paper investigates the origins of a widespread decision bias in betting markets, the favorite-longshot bias (FLB); in particular, whether it is caused by cognitive errors on the part of bettors or by the pricing policies of bookmakers. The methodology is based on previous literature, which has suggested that: (i) races, as decision tasks for bettors, can be distinguished by their degree of...
متن کامل