Shortcoming of decision markets: unexpected events
Posted: Thu Feb 13, 2025 4:47 am
Moreover, stock prices can take on a life of their own. After all, 'investors' have a new interest, namely the price and price fluctuations. So not necessarily predicting the best outcome. We all know the bubbles on the stock market that later burst and stock market panic that caused, for example, the interest on government bonds of countries such as Greece and Spain to rise enormously in a short time.
Another shortcoming of decision markets is that they cannot predict unexpected events such as incidents, resigning party leaders or sex scandals. Unlike surveys, stock markets do not lend themselves to these kinds of speculative questions and scenarios. They revolve around what the majority considers most likely to happen. Only when an incident has occurred will prices immediately adjust and the value be re-established. In practice, decision markets therefore provide a good picture of the general opinion and sentiment among investors.
Investors in political stock markets
In the case of stock prices of listed companies, the expectation is japan telegram data that the insider professional investors have sufficient information to be able to estimate the value of a company. As soon as many ordinary citizens start investing, as is happening in the United States with pensions, then stock prices suddenly show a much more erratic course. These 'ordinary citizens' are suddenly much more interested in the companies (read: political parties) than before. There is then more 'panicking' and reaction to information from the news.
Who are the investors in the political stock markets? Are they the political professionals who think they know what is going on among the general population? Or are they the ordinary people themselves, Henk and Ingrid, who participate? That is doubtful. However, a reasonable cross-section of the population will be needed to be able to properly estimate how that same population will vote. Diversity is essential for the wisdom of crowds.
But if the neighbor doesn't know what she's going to vote for, how do you think you can know what the neighbor is going to vote for? Or do you secretly just want to make a profit?
Another shortcoming of decision markets is that they cannot predict unexpected events such as incidents, resigning party leaders or sex scandals. Unlike surveys, stock markets do not lend themselves to these kinds of speculative questions and scenarios. They revolve around what the majority considers most likely to happen. Only when an incident has occurred will prices immediately adjust and the value be re-established. In practice, decision markets therefore provide a good picture of the general opinion and sentiment among investors.
Investors in political stock markets
In the case of stock prices of listed companies, the expectation is japan telegram data that the insider professional investors have sufficient information to be able to estimate the value of a company. As soon as many ordinary citizens start investing, as is happening in the United States with pensions, then stock prices suddenly show a much more erratic course. These 'ordinary citizens' are suddenly much more interested in the companies (read: political parties) than before. There is then more 'panicking' and reaction to information from the news.
Who are the investors in the political stock markets? Are they the political professionals who think they know what is going on among the general population? Or are they the ordinary people themselves, Henk and Ingrid, who participate? That is doubtful. However, a reasonable cross-section of the population will be needed to be able to properly estimate how that same population will vote. Diversity is essential for the wisdom of crowds.
But if the neighbor doesn't know what she's going to vote for, how do you think you can know what the neighbor is going to vote for? Or do you secretly just want to make a profit?