Prediction Markets

Evidence of Prediction Market Inefficiency From PredictIt’s 2020 U.S. Presidential Election Markets

I argue that persistent and exploitable pricing anomalies were present in PredictIt’s 2020 U.S. presidential election prediction markets. I claim that these pricing inefficiencies were the result of a subset of market participants acting on misinformation which erroneously led them to conclude that Donald Trump had won the election. I conclude by discussing the implications of traders struggling to correctly distinguish relevant information from misinformation for the efficient market hypothesis.

By Aiden Singh, August 28, 2022