Journal
INTERNATIONAL JOURNAL OF FORECASTING
Volume 24, Issue 2, Pages 283-298Publisher
ELSEVIER
DOI: 10.1016/j.ijforecast.2008.03.007
Keywords
combining forecasts; evaluating forecasts; financial markets; election forecasting; polls; comparative methods; automatic forecasting; calibration; comparative studies; long-term forecasting; election market; political stock market
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Prediction markets are designed specifically to forecast events such as elections. Though election prediction markets have been being conducted for almost twenty years, to date nearly all of the evidence on efficiency compares election eve forecasts with final pre-election polls and actual outcomes. Here, we present evidence that prediction markets outperform polls for longer horizons. We gather national polls for the 1988 through 2004 U.S. Presidential elections and ask whether either the poll or a contemporaneous Iowa Electronic Markets vote-share market prediction is closer to the eventual outcome for the two-major-party vote split. We compare market predictions to 964 polls over the five Presidential elections since 1988. The market is closer to the eventual outcome 74% of the time. Further, the market significantly outperforms the polls in every election when forecasting more than 100 days in advance. (C) 2008 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.
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