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.

RELATED TERMS
  1. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  2. Unbiased Predictor

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

    A market that is trending in one direction or another. A bull ...
  4. Trend

    The general direction of a market or of the price of an asset. ...
  5. Tracking Stock

    1. Common stock issued by a parent company that tracks the performance ...
  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. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  6. Economics

    The History of Stock Exchanges

    Stock exchanges began with countries who sailed east in the 1600s, braving pirates and bad weather to find goods they could trade back home.
  7. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  8. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  9. Fundamental Analysis

    5 Predictions for the Chinese Stock Market in 2016

    Find out why market analysts are making these five ominous predictions about the Chinese stock market in 2016, and how it may impact the entire world.
  10. Options & Futures

    Five Advantages of Futures Over Options

    Futures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. Do plane tickets get cheaper closer to the date of departure?

    The price of flights usually increases one month prior to the date of departure. Flights are usually cheapest between three ... Read Full Answer >>
  3. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  4. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center