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He, Xue-Zhong and Treich, Nicolas
(2012)
Heterogeneous Beliefs and Prediction Market Accuracy.
TSE Working Paper, n. 13-394, Toulouse
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Official URL : http://tse-fr.eu/pub/27155
Abstract
We consider a prediction market in which traders have heterogeneous prior beliefs in probabilities. In the two-state case, we derive necessary and sufficient conditions so that the prediction market is
accurate in the sense that the equilibrium state price equals the mean probabilities of traders' beliefs. We also provide a necessary and sufficient condition for the well documented favorite-longshot bias. In an
extension to many states, we revisit the results of Varian (1985) on the relationship between equilibrium state price and belief heterogeneity.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | 20 August 2012 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Prediction market, heterogeneous beliefs, risk aversion, favorite-longshot bias, complete markets, and asset prices |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 09 Jul 2014 17:35 |
| Last Modified: | 02 Apr 2021 15:48 |
| OAI Identifier: | oai:tse-fr.eu:27155 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15599 |
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- Heterogeneous Beliefs and Prediction Market Accuracy. (deposited 09 Jul 2014 17:35) [Currently Displayed]
