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Market Prices as Indicators of Political Events Evidence from the Experimental Market on the Czech Republic Parliamentary Election in 2002

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Abstract

According to efficient markets theory, the stock price on a competitive market is the best estimate of the stock’s present value. This is the basic assumption for predictions using experimental markets. The first part of the paper describes the features of such an experimental market, discusses shortly its advantages in providing predictions as compared to traditional opinion polls and identifies some assumptions that can influence its efficiency and predictive accuracy. The second part of the paper is then devoted to the results of the first experimental market organized in the Czech Republic, the political stock market on the Czech parliamentary elections into the Chamber of Deputies in June 2002.

Suggested Citation

  • Tomáš Cahlík & Adam Geršl & Michal Hlaváček & Michael Berlemann, 2005. "Market Prices as Indicators of Political Events Evidence from the Experimental Market on the Czech Republic Parliamentary Election in 2002," Working Papers IES 77, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
    • Handle: RePEc:fau:wpaper:wp077
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    1. František Turnovec & Jacek W. Mercik & Mariusz Mazurkiewicz, 2004. "Power Indices: Shapley-Shubik OR Penrose-Banzhaf?," Working Papers IES 48, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2004.
    2. Karel Janda, 2003. "Credit guarantees in a credit market with adverse selection," Prague Economic Papers, Prague University of Economics and Business, vol. 2003(4), pages 331-349.
    3. Wadim Strielkowski & Cathal O'Donoghue, 2006. "Ready to Go? EU Enlargement and Migration Potential: Lessons for the Czech Republic in the Context of Irish Migration Experience," Prague Economic Papers, Prague University of Economics and Business, vol. 2006(1), pages 14-28.
    4. Karel Janda, 2004. "Bankruptcy Procedures with Ex Post Moral Hazard," Working Papers IES 61, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2004.
    5. Michal Bauer, 2005. "Theory of the Firm under Uncertainty: Financing, Attitude to Risk and Output Behavior," Working Papers IES 71, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
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    Cited by:

    1. Adam Geršl, 2007. "Political Economy of Public Deficit: Perspectives for Constitutional Reform," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 1(1), pages 67-86, March.

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    More about this item

    Keywords

    Experimental economics; political stock markets; predictions;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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