Thomas A. Rietz

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Valuations from “prediction markets” reveal expectations about the likelihood of events. “Conditional prediction markets” reveal expectations conditional on other events occurring. For example, in 1996, the Iowa Electronic Markets (IEM) ran markets to predict the chances that different candidates would become the Republican Presidential nominee. Other(More)
In theory, concepts of market efficiency are conveniently ordered: "Strong form" efficiency implies prices reflect all public and private information, "semi-strong form" implies they reflect only public information and "weak form" implies they reflect only past prices. Assumptions about individual trader rationality, no arbitrage and the law of one price(More)
Prediction markets” are designed specifically to forecast events. Though such markets have been conduced for more than a decade, to date there is no analysis of their long-run predictive properties. We provide the first systematic evidence on the long-run predictive power of these markets by studying ex post accuracy and means of measuring ex ante forecast(More)
“Prediction markets” are designed specifically to forecast events such as elections. Though election prediction markets have been conducted for almost twenty years, to date nearly all evidence on efficiency compares election eve forecasts to final pre-election polls and actual outcomes. Here, we present evidence that prediction markets outperform polls for(More)
We examine communication in laboratory games with asymmetric information. Sellers know true asset qualities. Potential buyers only know the quality distribution. Prohibiting communication, we document the degree of adverse selection. Then we examine two alternative communication mechanisms. Under “cheap talk,” each seller can announce any subset of(More)
Twenty years ago, Thomas A. Rietz (1988) showed that infrequent, large drops in consumption make the theoretical equity premium large. Recent research has resurrected this ‘disaster’explanation of the equity premium puzzle. Robert J. Barro (2006) measures disasters during the XXth century, and …nds that they are frequent and large enough, and stock returns(More)
Prediction markets, in which contract prices are used to forecast future events, are increasingly applied to various domains ranging from political contests to scientific breakthroughs. However, the dynamics of such markets are not well understood. Here, we study the return dynamics of the oldest, most data-rich prediction markets, the Iowa Electronic(More)
Researchers vigorously debate the impact of incentives in preference reversal experiments. Do incentives alter behavior and generate economically consistent choices? Lichtenstein and Slovic (1971) document inconsistencies (reversals) in revealed preference in gamble pairs across paired choice and individual pricing tasks. The observed pattern is(More)