Does Money Matter? Emile Servan-Schreiber NewsFutures, Inc

Does Money Matter?

Emile Servan-SchreiberNewsFutures, Inc

It’s an important issue

• When you want to bring markets within companies;

• For US-based public-policy markets;

• How much accuracy is at stake when you forgo real-money for play-money?

The Challenge

vs

More than 200 individual games

Price = ProbabilityAcquire or lose points through a scoring rule

New England Patriots over Philadelphia Eagles

Absolute Accumulation of Pointsin the Probability Football Contest

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 3 5 7 9 11 13 15 17 19 21

Week into the NFL season

Servan-Schreiber, Wolfers, Pennock & Galebach (2004)Prediction Markets: Does Money Matter? Electronic Markets, 14(3).

Tradesports vs. NewsFutures(predicting NFL games)

Absolute Accumulation of Pointsin the Probability Football Contest

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 3 5 7 9 11 13 15 17 19 21

Week into the NFL season

Tradesports vs. NewsFutures(predicting NFL games)

Servan-Schreiber, Wolfers, Pennock & Galebach (2004)Prediction Markets: Does Money Matter? Electronic Markets, 14(3).

Absolute Accumulation of Pointsin the Probability Football Contest

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 3 5 7 9 11 13 15 17 19 21

Week into the NFL season

Using real-moneydoesn’t buy any

additional accuracyas long as the tradersare knowledgeable

and motivated(upside).

Real Cash vs. Play Money(predicting NFL games)

Servan-Schreiber, Wolfers, Pennock & Galebach (2004)Prediction Markets: Does Money Matter? Electronic Markets, 14(3).

Markets vs Individual Experts

NewsFutures’ markets finished in the top 0.4%Competing against 1810 individual NFL experts

In the Probability Football contest(rank = 6th / 1810)

Servan-Schreiber, Wolfers, Pennock & Galebach (2004)Prediction Markets: Does Money Matter? Electronic Markets, 14(3).

Prediction Performance of MarketsRelative to Individual Experts

020406080

100120140160180200220240260280300

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Week into the NFL season

Ra

nk NewsFutures

Tradesports

Thanks to their consistent accuracy over the entire season, the markets progressively beat most individual “experts”.

Markets vs Individual Experts

Servan-Schreiber, Wolfers, Pennock & Galebach (2004)Prediction Markets: Does Money Matter? Electronic Markets, 14(3).

Google IPO Market

Google Market Cap - End of 1st day (8/19)

10

15

20

25

30

35

40

Fo

rec

as

t M

ark

et

Ca

p (

$ B

illio

n)

TRIF (wta)

Actual

IPO-cap

IEM (wta)

Bush 2004 Contract

A Bush “blowout” or “too-close-to-call”?

50%chance

An unusually close election

• Smallest popular vote margin of victory (2.7%) for an incumbent president since 1828.

• It all came down to 60,000 votes in Ohio.