A couple of weeks back, I described my attempt to use prediction markets to predict my final course evaluation. The final result of the market was:
| PREDICTIONS | CURRENT VALUE | TODAY |
| From 6.0 to 6.5 | $49.95 | (closed) |
| From 6.5 to 7.0 | $36.86 | (closed) |
| From 5.0 to 5.5 | $4.60 | (closed) |
| From 5.5 to 6.0 | $4.34 | (closed) |
| From 1.0 to 5.0 | $4.23 | (closed) |
Taking the weighted average of these predictions, the market shows a predicted outcome of:
And what was the final course evaluation? Did the market work? Well, the final course evaluation was a 6.212 with 35 student ratings. A relative error of 0.002 or 0.2%. I cannot think that I could have gotten a more accurate prediction!
Interestingly enough, by observing the market, I can see that very few people actually picked the 6.0-6.5 range. Most of the players bought contracts in the 6.5-7.0 range. These contracts played their role of counterbalancing the few players that bought contracts in the 1.0-5.0 and in the 5.0-6.0 ranges. Therefore, while most of the action was in contracts that did not predict the correct range, this activity was crucial for the market to balance and give the correct prediction.
