Collaborating Authors

Betting Strategies, Market Selection, and the Wisdom of Crowds

AAAI Conferences

We investigate the limiting behavior of trader wealth and prices in a simple prediction market with a finite set of participants having heterogeneous beliefs. Traders bet repeatedly on the outcome of a binary event with fixed Bernoulli success probability. A class of strategies, including (fractional) Kelly betting and constant relative risk aversion (CRRA) are considered. We show that when traders are willing to risk only a small fraction of their wealth in any period, belief heterogeneity can persist indefinitely; if bets are large in proportion to wealth then only the most accurate belief type survives. The market price is more accurate in the long run when traders with less accurate beliefs also survive. That is, the survival of traders with heterogeneous beliefs, some less accurate than others, allows the market price to better reflect the objective probability of the event in the long run.

What the Markets Can, and Can't, Tell Us About a Trump Presidency

The New Yorker

There was a moment on Tuesday night when it seemed as if the world economy might collapse along with Hillary Clinton's chances of becoming President. Stock futures--a bet on how the stock market would react when it opened on Wednesday morning--fell everywhere. The Dow Jones Industrial Average had its largest rise in months on Monday, when investors seemed to believe a Clinton victory was all but guaranteed. Then, on Tuesday night, Dow futures predicted a fall of more than eight hundred points, which would be the largest single-day collapse on record. The S&P 500 futures fell five per cent, a fall so precipitous that it triggered a freeze in trading.

Tokyo stocks rise further on U.S. gains

The Japan Times

Stocks continued to surge on the Tokyo Stock Exchange Monday, with investors encouraged by seeing the U.S. Dow Jones industrial average extend its winning streak to a sixth session last Friday.

Tokyo stocks rise further on brisk U.S. equities

The Japan Times

Stocks gained further ground on the Tokyo Stock Exchange on Monday thanks to rises on Wall Street on Friday, lifting the benchmark Nikkei average to a three-week closing high.

Nikkei retreats to 22,200 as traders take money off table

The Japan Times

Stocks turned lower Wednesday on the Tokyo Stock Exchange as selling ensued to lock in gains. The 225-issue Nikkei average sagged 59.74 points, or 0.27 percent, to end at 22,200.00, after rising 41.84 points on Tuesday. The Topix index of all first-section issues closed down 10.92 points, or 0.67 percent, at 1,612.05. It rose 4.35 points the previous day. Profit-taking wiped out early gains that followed Wall Street's overnight advance, brokers said.