Here is an easy to digest 55 slide powerpoint presentation for the beginner, from George Zachar.

For those interested by the subject, I remember my own short page on this topic which contains other links as well. Could this site make a good prediction market? I suspect not, because of the noticeable bull/optimistic bias.

Alex Forshaw replies:

There definitely is some debate on the issue of play money markets' allegedly comparable efficacy to that of real money markets. In my opinion, Wolfers was too hasty in putting his academic imprimatur on the notion of effective play money markets. The MidasOracle group blog (to which I am a frequent contributor) is a very good prediction markets portal.

Russell Sears remarks:

As an actuary working in the insurance industry, I wonder what the hedging risk effect is on many of these prediction markets. It would seem to me that for many of the low probability, high risk events (bird flu pandemic, specific terrorist attack) especially for thinly traded contracts that the insurance premium would overwhelm the predictive effect. Further I suspect the variance of the "risk premium" due to media noise may dwarf the change in actual risk.





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