Prediction Markets Tend to Incorporate Information That Cannot Be Found In Other Models

Prediction markets respond rapidly to events such as the capture of Osama bin Laden and the performance of political candidates in debates, incorporating information that traditional models cannot. Market traders quickly factored in the potential impact of these events on the election outcome, unlike traditional models that rely on slower-changing variables. This demonstrates the ability of prediction markets to capture the influence of variables not included in conventional models, like debate performances. This characteristic extends to various forecasting problems, including COVID and climate forecasting, making prediction markets valuable for incorporating unique and critical information.