Anatomy of an Experimental Political Stock Market

Results from the Iowa Political Stock Market are analyzed to ascertain how well markets work as aggregators of information. We find that the market worked extremely well, dominating opinion polls in forecasting the outcome of the 1988 presidential election, even though traders in the market exhibite...

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Bibliographic Details
Published in:	The American economic review Vol. 82; no. 5; pp. 1142 - 1161
Main Authors:	Forsythe, Robert, Nelson, Forrest, Neumann, George R., Wright, Jack
Format:	Journal Article
Language:	English
Published:	Menasha, Wis American Economic Association 01-12-1992
Subjects:	Access to information Bias Candidates Economic theory Economics Elections Individual behaviour Judgment sampling Market prices Political candidates Political debate Political science Polls Predictions Presidency Presidential debates Presidential elections Public opinion Public opinion polls Securities markets Statistical analysis Stock exchange Stock markets Stock shares Trade Voting United States > US
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Summary:	Results from the Iowa Political Stock Market are analyzed to ascertain how well markets work as aggregators of information. We find that the market worked extremely well, dominating opinion polls in forecasting the outcome of the 1988 presidential election, even though traders in the market exhibited substantial amounts of judgment biases. Our explanation is that judgment bias refers to average behavior, while in markets it is marginal traders who influence price. We present evidence that in this market a sufficient number of traders were free of judgment bias so that the market was able to work well.
Bibliography:	ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23
ISSN:	0002-8282 1944-7981