Prediction: models versus market

This is not the best way to start serious analysis of models versus markets in the prediction space, but given that I’m writing an exam tomorrow I thought I should put the links out there now.  I’ll address this topic again in the future.

Steven Levitt (of Freakonomics fame) discussed an old paper of his and its usefulness in predicting US mid-term elections. This is now a 16 year-old model, which presumably could benefit with some updating for the last 16 years worth of data.

It does, currently anyway, give very similar answers to one of the biggest prediction markets operating, InTrade.com.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.