Abstract

People have long noticed that speculative markets, though created for other purposes, also do a great job of aggregating relevant information. In fact, it is hard to find information not embodied by such market prices. This is, in part, because anyone who finds such neglected information can profit by trading on it, thereby reducing the neglect.1 So far, speculative markets have done well in every known head-to-head field comparison with other forecasting institutions. Orange juice futures improved on National Weather Service forecasts,2 horse race markets beat horse race experts,3 Oscar markets beat columnist forecasts,4 gas-demand markets beat gas-demand experts,5 stock markets beat the official NASA panel at fingering the guilty company in the Challenger accident,6 election markets beat national opinion polls,7 and corporate sales markets beat official corporate forecasts.8 Recently, some have considered creating new markets specifically to take.