Prediction market accuracy for business forecasting
In Vaughan Williams, L. (in press). Prediction Markets, Routledge.
Abstract. This review summarizes published empirical studies that compared the accuracy of prediction markets to alternative forecasting methods in the field of business forecasting. Over eight comparisons, there were no differences in the accuracy of prediction markets and alternative methods. While prediction markets were more accurate than a naïve and a simple econometric model, evidence on the relative accuracy of prediction markets and individual and combined judgment was mixed. The lack of evaluation studies is a major conclusion of this review. Future research should further evaluate the relative accuracy of prediction markets to identify conditions under which the method is favorable to alternative methods.
