Prediction Market


DEFINITION of 'Prediction Market'

A collection of people speculating on a variety of events - exchange averages, election results, commodity prices, quarterly sales results or even such things as gross movie receipts. The Iowa Electronic Markets, operated by faculty at the University of Iowa Henry B. Tippie College of Business are among the better known prediction markets in operation.

BREAKING DOWN 'Prediction Market'

Because they represent a wide variety of thoughts and opinions - much like the markets as a whole - prediction markets have proven to be quite effective as a prognostic tool. As a result of their visionary value, prediction markets (sometimes referred to as virtual markets) have been utilized by a number of large companies - like Google, for example.

  1. Unbiased Predictor

    The notion that the current market price of a physical commodity ...
  2. Trending Market

    A market that is trending in one direction or another. A bull ...
  3. Tracking Stock

    1. Common stock issued by a parent company that tracks the performance ...
  4. Trend

    The general direction of a market or of the price of an asset. ...
  5. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  6. Futures

    A financial contract obligating the buyer to purchase an asset ...
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Consensus Indicators

    Learn how the herd is almost always wrong, or at least late in jumping on the bandwagon.
  2. Trading Strategies

    Profit Without Predicting The Market

    Traders who try to predict the future can actually harm their trading options.
  3. Options & Futures

    Trading Psychology: Consensus Indicators - Part 2

    Professional market players are some of the best models for the individual small trader to mimic.
  4. Charts & Patterns

    Heikin-Ashi: A Better Candlestick

    Enhance trend isolation and prediction of future prices with this technique.
  5. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  6. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  7. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  8. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  9. Investing

    Asset Manager Ethics: Rules Governing Capital Markets

    The integrity of the capital markets needs to be kept at utmost importance for all investors. This article shows how to maintain the integrity while investing.
  10. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  3. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  4. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!