Using Prediction Markets to Track Information Flows: Evidence from Google
The paper analyzes Google's internal prediction markets, highlighting biases such as optimism, correlations in trading among proximate employees, and insights into how organizations process information and communicate.
static.googleusercontent.com
This is not at all mysterious if we realize that engaging with markets requires individuals to compress the economic signal nascent in the n-dimensions of their information, heuristics, judgments, and stakes, and project it onto the single dimension of price, and that markets do not project the aggregates; they aggregate the projections.
The paper investigates the relationship between liquidity and market efficiency in prediction markets, revealing that increased liquidity may not enhance pricing accuracy and can even worsen it due to naive trading behavior.
business.columbia.edu