COMPARING THE FORECASTING ACCURACY OF PREDICTION MARKETS AND POLLS FOR TAIWAN’S PRESIDENTIAL AND MAYORAL ELECTIONS

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Published: Dec 19, 2012
DOI: https://doi.org/10.5750/jpm.v5i3.490
Keywords:
prediction markets opinion polls forecast accuracy 2006 Taipei mayoral election 2006 Kaohsiung mayoral election 2008 Taiwan presidential election.

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Chen-yuan Tung
Graduate Institute of Development Studies, National Chengchi University
Tzu-Chuan Chou
Graduate Institute of Development Studies, National Chengchi University
Jih-wen Lin
Institute of Political Science at Academia Sinica and National Chengchi University
Hsin-yi Lin
Department of Economics at the National Chengchi University

Abstract

This paper devises a methodology to compare the accuracy of prediction markets and polls. The data of the Exchange of Future Events (xFuture) for Taiwan’s 2006 mayoral elections and 2008 presidential election show that the prediction markets outperform the opinion polls in various indices of accuracy. In terms of the last forecast before the election date, the accuracy of the prediction markets is 3 to 10 percent higher than that of the opinion polls. When comparing the accuracy of historical forecasts, the prediction markets outperform the polls in 93 to 100 percent of the cases. Moreover, the average accuracy of the prediction markets is 9 to 10 percent higher than that of the polls, with a standard deviation more than 2 percent less than that of the polls. To examine the robustness of these comparisons, this paper conducts two tests including daily forecast and normalized accuracy, and finds that the prediction markets successfully pass the tests with a significantly better accuracy than the polls.

Article Details

Issue
Vol. 5 No. 3 (2011): Elections and Prediction Markets
Section
Articles

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