Wanna bet there will be war? A time-series analysis of prediction markets during the Libya conflict 2011

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Published: Jan 8, 2014
DOI: https://doi.org/10.5750/jpm.v7i3.790
Keywords:
time-series conflict prediction market(s) forecasting international relations event study

Main Article Content

Sebastian Matthias Woerle
University of Konstanz Cornell University

Abstract

This paper tests the explanatory power of an online Prediction market on the ousting of Muammar Gaddafi as Libya’s leader during the uprising in 2011. Based on the theory of efficient markets and collective intelligence, it employs a GARCH time-series analysis and an event study of Intrade data to test the impact of events on market performance and trading volume. The market distinguishes sensibly between relevant and irrelevant news for the outcome of the conflict and prices them in at a surprising speed. Some support for short-term anticipative trading and price performance is found. The analyzed market is found to be semi-strong efficient and works as an evaluative tool in international conflict.

Article Details

Issue
Vol. 7 No. 3 (2013)
Section
Articles
Author Biography

Sebastian Matthias Woerle, University of Konstanz Cornell University

M.Sc. Political Economy candidate 2014Department of Economics and Department of Political Science and Public Administration, University of Konstanz

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