Public Markets For Predicting Google's Market Cap

Posted by timothy on Wednesday August 11, 2004 @12:11AM 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."

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Re:Ironic... by TheClarkey · 2004-08-11 00:29 · 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.