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Prediction Markets: Do They Predict the Polls or the Election Results? The Case of the Israeli Elections in April 2019

In: Behavioral Finance A Novel Approach

Author

Listed:
  • Rachel Calipha
  • Itzhak Venezia

Abstract

Prediction markets have been found to provide relatively accurate and inexpensive means for forecasting various events including elections results. However, since in most political elections, there exist public polls that predict the results as well as betting houses that publish odds on the various candidates and since voters obtain information from these sources, the marginal contribution of prediction markets is uncertain and needs to be assessed empirically. In this chapter, we investigate the correlations between poll results and prediction markets results throughout the election campaign in Israel prior to the April 2019 elections and compare their accuracy. We show that although correlated and influenced by the polls, prediction markets have some value. Given their minimal costs of operation, such markets are worthwhile.

Suggested Citation

  • Rachel Calipha & Itzhak Venezia, 2020. "Prediction Markets: Do They Predict the Polls or the Election Results? The Case of the Israeli Elections in April 2019," World Scientific Book Chapters, in: Itzhak Venezia (ed.), Behavioral Finance A Novel Approach, chapter 1, pages 3-17, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811229251_0001
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    More about this item

    Keywords

    Analysts Recommendations; Behavioral Biases; Behavioral Economics; Behavioral Finance; Board of Directors ; Compensation; Compensation Committee; Control; Coronavirus; Corporate Governance; COVID-19; Decision Making; Disposition Effect; Earnings Management; Elections; Emotions; Financial Crises; Financial Market Anomalies; Financial Markets; Forecast-Accuracy; Gender Differences; Heuristics; Interval Forecasting; Investment; Investor Horizon; Investors' Beliefs; IPO Under-Pricing; Life Expectancy; Myopia; Overconfidence; Pensions Industry; Policy Reforms; Polls; Portfolio Risk; Prediction Markets; Regulation; Stock Price Drifts; Time Preferences;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G4 - Financial Economics - - Behavioral Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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