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Political Stock Markets and Unreliable Polls

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  • Peter Bohm
  • Joakim Sonnegard

Abstract

A political stock market (PSM) clearly beat the polls in predicting the outcome of a Swedish referendum on whether or not Sweden should join the European Union. In fact, polls were unable to make such predictions since the number of undecided respondents always far exceeded the observed YES/NO margin. However, an obstacle to PSMs serving as a superior forecasting instrument is that they can be sensitive to price distortions ‐ by interest groups that may wish to effectuate, and pay for, such distortions ‐ or forecast competitions tied to PSM trade gains, the latter of which was tested here.

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  • Peter Bohm & Joakim Sonnegard, 1999. "Political Stock Markets and Unreliable Polls," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 205-222, June.
    • Handle: RePEc:bla:scandj:v:101:y:1999:i:2:p:205-222
    DOI: 10.1111/1467-9442.00153
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    Cited by:

    1. Robert Kast & Stéphane Luchini, 2002. "Calcul économique et incertitude socio-politique : une procédure d’évaluation des projets publics," Économie et Prévision, Programme National Persée, vol. 156(5), pages 73-84.
    2. Mikuláš Gangur & Miroslav Plevný, 2014. "Tools for Consumer Rights Protection in the Prediction of Electronic Virtual Market and Technological Changes," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(36), pages 578-578, May.
    3. Dai, Min & Jia, Yanwei & Kou, Steven, 2021. "The wisdom of the crowd and prediction markets," Journal of Econometrics, Elsevier, vol. 222(1), pages 561-578.
    4. Demissew Diro Ejara & Raja Nag & Kamal P. Upadhyaya, 2012. "Opinion polls and the stock market: evidence from the 2008 US presidential election," Applied Financial Economics, Taylor & Francis Journals, vol. 22(6), pages 437-443, March.
    5. Jan Hansen & Carsten Schmidt & Martin Strobel, 2004. "Manipulation in political stock markets - preconditions and evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 11(7), pages 459-463.
    6. Forsell, Eskil & Viganola, Domenico & Pfeiffer, Thomas & Almenberg, Johan & Wilson, Brad & Chen, Yiling & Nosek, Brian A. & Johannesson, Magnus & Dreber, Anna, 2019. "Predicting replication outcomes in the Many Labs 2 study," Journal of Economic Psychology, Elsevier, vol. 75(PA).
    7. Berlemann, Michael & Schmidt, Carsten, 2001. "Predictive accuracy of political stock markets: Empirical evidence from an European perspective," Dresden Discussion Paper Series in Economics 05/01, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    8. Subhani, Muhammad Imtiaz & Hasan, Syed Akif & Osman, Ms. Amber, 2012. "Is Sudden News an Origin of More Systematic Risk in Common Stocks?," MPRA Paper 45139, University Library of Munich, Germany.

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