Prediction market accuracy: crowd wisdom or informed minority? • SSRN (opens in new tab)

Roberto Gomez Cram, Yunhan Guo, Theis Ingerslev Jensen, Howard Kung: Prediction markets are remarkably accurate, yet the source of this accuracy remains poorly understood. The conventional view attributes it to crowd wisdom, whereby prices aggregate information from a large and diverse pool of participants. We show instead that accuracy is driven by a small minority of informed traders. Using the universe of transactions from a large prediction market platform, we identify these traders and s...