Related papers: How manipulable are prediction markets?
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
A prediction market is a useful means of aggregating information about a future event. To function, the market needs a trusted entity who will verify the true outcome in the end. Motivated by the recent introduction of decentralized…
First-price auctions have many desirable properties, including uniquely possessing some, like credibility. However, first-price auctions are also inherently non-truthful, and non-truthfulness may result in instability and inefficiencies.…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are reconstructed based on information about market member…
We study how information perturbations can destabilize two-sided matching markets. In our model, agents arrive on the market over two periods, while agents in the first period do not know the types of those arriving later. Agents already…
Using transaction-level trade data from Polymarket's 2024 U.S. presidential election market, we study how prediction markets process shocks. We analyze three events: the Biden-Trump debate, the assassination attempt on Trump, and Biden's…
We consider a network of interacting agents and we model the process of choice on the adoption of a given innovative product by means of statistical-mechanics tools. The modelization allows us to focus on the effects of direct interactions…
In recent years, cryptocurrencies have attracted growing attention from both private investors and institutions. Among them, Bitcoin stands out for its impressive volatility and widespread influence. This paper explores the predictability…
In a prediction market, individuals can sequentially place bets on the outcome of a future event. This leaves a trail of personal probabilities for the event, each being conditional on the current individual's private background knowledge…
Ensuring sufficient liquidity is one of the key challenges for designers of prediction markets. Various market making algorithms have been proposed in the literature and deployed in practice, but there has been little effort to evaluate…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
Stock market forecasting is very important in the planning of business activities. Stock price prediction has attracted many researchers in multiple disciplines including computer science, statistics, economics, finance, and operations…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…