Does Money Matter?
Emile Servan-Schreiber
NewsFutures, Inc
It’s an important issue
• When you want to bring markets within
companies;
• For US-based public-policy markets;
• How much accuracy is at stake when you
forgo real-money for play-money?
The Challenge
vs
More than 200 individual games
New England Patriots over Philadelphia Eagles
Price = Probability
Acquire or lose points through a scoring rule
Tradesports vs. NewsFutures
(predicting NFL games)
Absolute Accumulation of Points
in the Probability Football Contest
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
1
3
5
7
9
11 13 15 17 19 21
Week into the NFL season
Servan-Schreiber, Wolfers, Pennock & Galebach (2004)
Prediction Markets: Does Money Matter? Electronic Markets, 14(3).
Tradesports vs. NewsFutures
(predicting NFL games)
Absolute Accumulation of Points
in the Probability Football Contest
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
1
3
5
7
9
11 13 15 17 19 21
Week into the NFL season
Servan-Schreiber, Wolfers, Pennock & Galebach (2004)
Prediction Markets: Does Money Matter? Electronic Markets, 14(3).
Real Cash vs. Play Money
(predicting NFL games)
Absolute Accumulation of Points
in the Probability Football Contest
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
1
3
5
7
9
11 13 15 17 19 21
Using real-money
doesn’t buy any
additional accuracy
as long as the traders
are knowledgeable
and motivated
(upside).
Week into the NFL season
Servan-Schreiber, Wolfers, Pennock & Galebach (2004)
Prediction Markets: Does Money Matter? Electronic Markets, 14(3).
Markets vs Individual Experts
NewsFutures’ markets finished in the top 0.4%
Competing against 1810 individual NFL experts
In the Probability Football contest
(rank = 6th / 1810)
Servan-Schreiber, Wolfers, Pennock & Galebach (2004)
Prediction Markets: Does Money Matter? Electronic Markets, 14(3).
Markets vs Individual Experts
Rank
Prediction Performance of Markets
Relative to Individual Experts
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
NewsFutures
Tradesports
1
2
3
4
5
6
7
8
9 10 11 12 13 14
Thanks to their
consistent accuracy
over the entire
season, the markets
progressively beat
most individual
“experts”.
Week into the NFL season
Servan-Schreiber, Wolfers, Pennock & Galebach (2004)
Prediction Markets: Does Money Matter? Electronic Markets, 14(3).
Google IPO Market
40
35
30
TRIF (wta)
Actual
IPO-cap
IEM (wta)
25
20
15
8/
11
7/
28
7/
14
6/
30
6/
16
6/
2
5/
19
10
5/
5
Forecast Market Cap ($ Billion)
Google Market Cap - End of 1st day (8/19)
Bush 2004 Contract
50%
chance
A Bush “blowout” or “too-close-to-call”?
An unusually close election
• Smallest popular vote margin of victory
(2.7%) for an incumbent president since
1828.
• It all came down to 60,000 votes in Ohio.