Polls vs Prediction Markets

Extracted Attributes

• Polls Purpose

  Gauge public sentiment, forecast election outcomes

• Polls Advantage

  Can be accurate if unbiased, enhance democratic engagement

• Polls Mechanism

  Cross-sectional datasets, participants asked who they will vote for

• Forecasting Comparison

  Both are error-prone, but errors are uncorrelated, suggesting value in combined view for better election forecasting.

• Prediction Market Type

  Exchange-traded markets

• Prediction Market Purpose

  Forecast specific outcomes, aggregate information and beliefs

• Prediction Market Mechanism

  Financial incentives, trading bets, market prices reflect perceived probability

• Prediction Market Common Form

  Binary option market

• Prediction Market Key Concept

  Crowdsourcing

• Prediction Market Disadvantage

  Potential for bias in raw data, error-prone

• Polls Disadvantage (vs. markets)

  Do not reflect changing conditions in real-time, error-prone, difficult to collect unbiased data

• Prediction Market Contract Range

  0% to 100%

• Historical Performance (Pre-1930s)

  Markets predicted better without polls in US presidential elections.

• Historical Performance (Post-1930s)

  Polls generally had smaller Root Mean Square Error (RMSE) than markets for the same period.

• Prediction Market Advantage (vs. polls)

  Adapt to new information quickly, continuous, capture inside information

Timeline

• Historical assessment of US presidential election markets began, showing markets predicted better without polls. (Source: Web Search)

  1880

• Scientific polling was introduced, after which polls generally showed a smaller RMSE than markets for election prediction. (Source: Web Search)

  1930s

• Bet pricing on Polygon suggested Donald Trump had a 66% probability of winning and Kamala Harris a 34% probability for the election; FiveThirtyEight's polling data averages showed Harris with 48% of the national vote to Trump's 52%. (Source: Web Search)

  2024-10-30

• An article titled "Prediction Markets + Polls + Economic Indicators: Better Election Forecasting?" was published, discussing the benefits of combining these methods. (Source: Web Search)

  2024-10-31

Prediction market

Prediction markets, also known as betting markets, information markets, decision markets, idea futures or event derivatives, are open markets that enable the prediction of specific outcomes using financial incentives. They are exchange-traded markets established for trading bets in the outcome of various events. The market prices can indicate what the crowd thinks the probability of the event is. A typical prediction market contract is set up to trade between 0 and 100%. The most common form of a prediction market is a binary option market, which will expire at the price of 0 or 100%. Prediction markets can be thought of as belonging to the more general concept of crowdsourcing which is specially designed to aggregate information on particular topics of interest. The main purposes of prediction markets are eliciting aggregating beliefs over an unknown future outcome. Traders with different beliefs trade on contracts whose payoffs are related to the unknown future outcome and the market prices of the contracts are considered as the aggregated belief.

Web Search Results

• Markets vs. polls as election predictors: An historical assessment

  Expectation polls try to exloit the first issue (Graefe, 2014), while prediction markets, as efficient aggregators of information, exploit both these issues to yield election forecasts (see also Sections 2.6.4 and 2.11.4). Several studies have proven the performance of these approaches (Berg, Nelson, & Rietz, 2008; Erikson & Wlezien, 2012; Williams & Reade, 2016; Wolfers & Zitzewitz, 2004), even studying their links with opinion polls (Brown, Reade, & Vaughan Williams, 2019). Practice has also [...] ► This article compares the performance of prediction markets and vote intention polls as election predictors. ►The analysis goes back in time to assess the historical performance of presidential election markets in the US since 1880. ► Using the data, it is possible to evaluate the performance of prediction markets both before and after the introduction of scientific polling. ► Surprisingly, markets predicted better without polls, partly because pre-poll markets were good at extracting [...] Having compared prediction markets before and after polls, we next want to compare markets and polls directly. Since polling began in the 1930s, are polls or election markets the better forecaster on election eve? From our discussion of the various RMSEs, we already have the answer. Since the RMSE for polls (column 3 of Table 1) is smaller than the RMSE for the election markets for the same period (column 2 of Table 1), we already possess the information to answer that question. Polls are the

• [PDF] prediction markets vs. political polls: forecasting election outcomes

  adapt to new information more quickly than other forecasting and polling methods (Snowberg, Wolfers, Zitzewitz, 2012). Operationally, prediction markets are continuous as buyers and sellers can participate in the market by buying or selling contracts in real time. Since political polls are cross sectional datasets, they do not reflect changing conditions in real time. Furthermore, some research shows that efficient prediction markets are better at predicting elections than polling data and only [...] prediction markets and polls is in a prediction market buyers and sellers can buy or sell contracts 4 that align with their beliefs. In political polls, participants are asked which candidate they will vote for rather than which candidate they believe will win the election or nomination. In order for forecasts in prediction markets to be effective they rely on individual’s ability to effectively process information and for that information to be unbiased. When looking at individuals’ actions in [...] raw polling data. Despite unbiased polls being a more accurate predictor, prediction market data did a better job of incorporating new and timely information (Rothschild, 2009). Although unbiased political polling data is a more accurate predictor it is difficult to collect such data to study. The potential bias for raw prediction market data can make its forecasts less accurate but they are typically more accurate when compared to biased political polls. One distinct difference between

• Crowd prediction systems: Markets, polls, and elite forecasters

  than non-elite crowds, whereas prediction markets and prediction polls are approximately tied in terms of accuracy. [...] In the other complementary study, we examine the relative effectiveness of different prediction systems at reliably identifying consistently accurate forecasters. Our data afford such an assessment, as they feature prediction markets and prediction polls running in parallel across three seasons. We show that prediction markets and prediction polls are equally effective at identifying elite forecasters for prediction polls. The practical consequence of this finding is that high earners in a [...] Regarding the comparison of prediction systems, prior results showed higher accuracy of prediction polls relative to CDA markets when both are populated by sub-elite crowds(Atanasov et al., 2017). However, as discussed in Complementary Research Question 1, to the extent that the automated market maker of LMSR markets improves performance over that of CDA markets in small-crowd environments(Hanson, 2003), differences in accuracy between prediction markets and prediction polls may be reduced.

• Prediction Markets + Polls + Economic Indicators: Better Election ...

  The authors, in an email exchange, say these instruments offer insights beyond traditional, often non-model-based expert-driven election forecasting. The markets provide nearly immediate feedback, responding faster than polls to events such as debates, breaking news or economic data releases. They can also capture inside information that investors might have or reflect expectations of trends not yet visible in polling. [...] As of Oct. 30, bet pricing on Polygon suggests Trump has a 66% probability of winning and Harris a 34% probability. FiveThirtyEight’s polling data averages show Harris with 48% of the national vote to Trump’s 52%. The researchers suggest that both polling averages and prediction markets are error-prone. But because those errors are uncorrelated, it’s valuable to view them together to determine the true margin of difference in the probabilities. Identifying State Clusters [...] ##### Explore + --- ##### Areas + --- ##### Reading Lists + --- ##### The Review + --- ##### Social + --- facebook sharing button twitter sharing button # Prediction Markets + Polls + Economic Indicators: Better Election Forecasting? Written by 31 October 2024 4 min read Research by Topics Share ## A model incorporating markets that allow betting on elections suggests a role in prognostications

• What are the advantages of opinion polls? - Savanta

  2. Enhancing democratic engagement: Opinion polls can encourage public engagement by highlighting important issues and gauging interest in them. This can stimulate debate and participation, leading to a more vibrant and engaged electorate. 3. Accurately forecasting election outcomes: Polls are the most accurate way to forecast the outcomes of elections, indicating which candidates or parties are in the lead. While not foolproof, they can influence both campaign strategies and voter turnout. [...] Explore MPs | Parliamentary Panels | Poll Watch | Public & Social ### YourVue: Nurturing the next generation for market research 25/10/2024 - by Shaun Austin MPs | Parliamentary Panels | Poll Watch | Public & Social ### Labour in Government: Businesses continue to cash in 26/09/2024 - by James Watts Williamson MPs | Parliamentary Panels | Poll Watch | Public & Social ### Savanta's Political Research Director predictions ahead of polling day 03/07/2024 - by Chris Hopkins [...] Chris Hopkins Political Research Director 12/04/2024 Opinion polls play a significant role in modern society, offering a snapshot of public sentiment on various issues at a particular moment in time. They play a critical role in democracies, market research, social science, and media. Here are some of the advantages opinion polls offer: