Cashing in on Online Prediction Markets

garzpacho writes "BusinessWeek takes a look at the use of prediction markets to forecast business success. These markets have been taking the form of games online--the Hollywood Stock Exchange, for example, allows players to bet on the success of movies. Hollywood is currently one of the largest consumers of prediction market data, in part because movies' broad appeal leads to a large number of players, but also because the markets have been surprisingly accurate--92% in picking Oscar winners over the last three years. Because of this success, other industries are taking a look; pharmaceutical and tech storage businesses are currently working to set up their own markets."

Comments

Well, duh (re: Hollywood)

[truthsearch]

The Oscars are a popularity contest, so of course a prediction market will be accurate. Plus everyone knows if you throw in a mentally challanged main character or uglify a hot actress you're 10 times more likely to win the Oscar.

Re:Well, duh (re: Hollywood)

[TubeSteak]

The Oscars are a popularity contest, so of course a prediction market will be accurate.

I find myself agreeing with that sentiment.

From TFA: "The Hollywood Stock Exchange gives traders just enough information to be able to play the market."

You don't have to worry about risk to predict the success of a movie.

To do predictions for something like pharmaceuticals, you need vastly more technical information... something that pharma companys are loathe to part with (results of unreleased clinical trials for example).

Otherwise, you're just guessing at the risks involved.

No real money involved?

[ArcticCelt]

I understand that there is no real money involved. Do someone know a "good or recommended" web site with similar concept where you can cash on your knowledge and instinct?

I just did a search and found two but I am not sure if they are any good:

http://www.intrade.com/ where you can in many political, entertainement and world events

http://www.tradesports.com/ Mostly sports but also a bit of world events

Old field

[tansey]

This is actually a fairly old field of statistics. The story goes that a mathematician at a state fair saw there was a contest to see who could guess the weight of a pile of recently slaughtered beef. Everyone was allowed to guess at it: farmers, house wives, butchers, etc. In the end, the experts (i.e. the butchers) didn't win, and their answer was off by about 10%. However, the total of all the answers, averaged, was off by only .2 lbs.

This sparked the idea that the knowledge of the whole group can lead to better answers than the knowledge of a select group of experts. It's also been shown to be true with things like artificial intelligence and mathematical proof programs.

So it seems like hollywood and the like have just finally realized that the entire group of people can do better at predicting movie success than just some panel of marketing experts.

The article didn't mention the flu market...

[exp(pi*sqrt(163))]

...discussed here where you can buy stock in your favorite flu virus. Apparently it performs well in predicting flu outbreaks.