WASHINGTON, Nov. 5, 2020 /PRNewswire/ — Since at least August 7, approximately 90 days before Election Day, traders on PredictIt, the stock market for politics, have accurately been predicting the final outcome of the presidential election, including most of the most heavily contested and closely watched battleground states.
“Even as polls shifted—sometimes wildly—from day to day, our trading community demonstrated that prediction markets can provide a more accurate forecast than most of the leading pollsters, statisticians and analysts commonly cited by major media and relied upon by the electorate to give insights into the outcome,” said John Phillips, co-founder of PredictIt. “This only demonstrates the collective power of our platform, our community, and its ability to accurately forecast election results.”
In seven battleground states that have already been called—Florida, Iowa, Michigan, New Hampshire, Ohio, Texas, and Wisconsin—PredictIt accurately and consistently predicted the final outcome for at least the last two weeks leading up to Election Day. In one battleground state, North Carolina, the forecasted winner changed frequently over the last 90 days, showing an incredibly tight race for the final two weeks of the election. Depending on what happens in Arizona, Georgia, Pennsylvania, and Nevada, the traders could have been 100 percent accurate on the electoral count.
PredictIt allows traders to make predictions on future political events by buying 1-99 cent shares in binary outcomes—either yes or no. The resulting share price can be read as the probability of a specific event occurring, based on the wisdom of the crowd. The closer a share price gets to the 99¢ maximum, the more confident traders are that outcome will come true.
Once the event outcome is determined, the market is settled with all shares in the winning outcome settling at $1.00. In other words, a trader who purchases shares in an outcome at 65¢ would net a profit of 35¢ per share if the event comes to fruition. Since the share prices are part of a dynamic market that changes with events and expectations, that trader could also sell their shares before the market is settled.
As part of its mission, PredictIt shares its market data with nearly 230 university partners, including professors from West Point, Harvard, Carnegie Mellon, Columbia, Yale, University of Pennsylvania, Dartmouth, Oxford, Princeton, and Duke, among others. The data offers researchers a wealth of information that helps further our understanding of fields of study as diverse as behavioral finance, political psychology, computer science and game theory.
PredictIt launched as an academic project of the Victoria University of Wellington in New Zealand (VUW) with the help of Aristotle, a global leader in providing software, data processing and verification services. We operate under the terms of a No Action letter granted by the Commodity Futures Trading Commission (CFTC) in October, 2014.