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Public Markets For Predicting Google's Market Cap

Posted by timothy on from the put-your-non-money-where-your-mouth-is dept.

k2enemy writes "The Iowa Electronic Markets have created two markets where traders may buy and sell contracts based on beliefs of Google's market cap at the end of the first day of public trading. The first market, GOOGLE_LIN, trades contracts with liquidation values linearly dependent on the market cap. The second, GOOGLE_WTA, trades six unique and exhaustive contracts in a winner-takes-all market. The markets are currently suggesting a market cap around $30-35 billion. The IEM is also popular for its political markets, which have been very successful (more accurate than polls) at predicting political elections."

5 of 169 comments (clear)

  1. FUD by swordboy · · Score: 4, Interesting

    Anyone else notice the amount of FUD concerning the IPO? Google is the first to step in and help the little investor and, all of a sudden, the rich people are funding FUD campaigns so they can get in on the deal.

    --

    Life is the leading cause of death in America.
  2. Ironic... by xIcemanx · · Score: 3, Interesting

    that these people are pretty much "gambling" on the stock market, something that is pretty much gambling in and of itself.

    It's like gambling on someone else playing the slot machine. o.O O.o What's the point?

    1. Re:Ironic... by maan · · Score: 4, Interesting

      There's a subtle but interesting difference here, though. Whether the stock market is or isn't gambling is obviously a question in and of itself. But, by "adding a level of indirection", as you might say, you're "gambling" on people's reaction to how the stock will perform.

      Same with the slot machine. Indeed, a slot machine is supposed to be (nearly) completely random in its outcome. But how a player behaves at a slot machine is anything but random! So you're not betting on the same thing... It becomes very very interesting ;)

      Maan

    2. Re:Ironic... by TheClarkey · · Score: 5, Interesting

      The point is quite simple.

      Your guess and my guess will probably be different due to different influences.

      The theory goes, if you take a large enough sample of opinions from a mixture of sources, tech experts, financial experts, normal people the market prediction (i.e. the average of all the guesses) will be a closer guess than any one single expert.

      It isn't like gambling on a slot machine as a slot machine is pretty much a game of chance and odds.

      I'd suggest that you might find The Wisdom of Crowds by James Surowiecki useful, if your really interested in how these kind of decision markets work.

  3. Interesting Idea by lachlan76 · · Score: 3, Interesting

    It's an interesting idea of how to make predictions, because after all, like in real life, a lot of people will vote for someone/not at all because they think everyone else has.

    Kind of like one of those equations in Neural nets. I can't remember it exactly, I think it was something like 1/(e^(-t)*log(t)) that causes more change when the votes are close, and less when it's near the extremes, since with a very high/low buying price, you change people's confidence in that decision.

    I always thought it would be interesting to try it on /., with an uncapped mod limit, but there is a big change around the 2-3 area, but when you get to -1/5, each moderation becomes less of a change. Not really practical though. Wouldn't want to hurt /. servers.