The University of Buckingham Press Journals
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INFLUENCES ON THE TRUST IN PREDICTION MARKETS
No full text Prediction markets are an innovative forecasting method that has proven high prediction accuracy in many areas. The method is, however, far from being established since many organizations are still reluctant to use the method. In particular the trust in the forecast results is a key challenge that negatively impacts the adoption of the method. To get a better understanding of what drives trust in prediction markets we analyzed the perceptions of prediction market users. We identify factors that influence the trust and quantified them in an empirical study. The study is based on user surveys in six experimental prediction markets. The influencing factors were evaluated using a structural equation model. The results demonstrate that participants who are highly engaged and perceive trading in prediction market as exciting and entertaining also put a higher trust in the market results.
THE CHALLENGE OF INCENTIVE ALIGNMENT IN THE APPLICATION OF INFORMATION MARKETS WITHIN AN ORGANIZATION
Get PDFPrediction markets have captured the imagination of business thinkers—much like chaos theory captured it a decade ago. The urge is to apply prediction markets to a host of business challenges just like the urge was to apply insights of chaos theory to business challenges. However, the intelligent application of prediction markets within organizations may be no easier than the intelligent application of chaos theory to business strategy.I have chosen the comparison to chaos theory for two reasons. First, the excitement about prediction markets seems to me to have the same type of buzz that chaos theory carried in the late 1990s. Second, and more to the point, Jim Lavoie’s reference to the business potential of Web 2.0 tools arguably offers a platform for capturing some of the more realistic goals of those who once urged businesses to operate “on the edge of chaos”—as captured by the title of this popular-audience book: Surfing the Edge of Chaos: The Laws of Nature and the New Laws of Business
EVALUATING THE PREDICTIVENESS AND PROFITABILITY OF FOREIGN EXCHANGE RATE FORECASTING MODELS
No full textThis paper evaluates the performance of two competing currency models as a forecasting and trading tool in fund management. A dynamic vector error correction model is utilized to construct a currency forecasting and fair value forecasting model for the Euro-Dollar exchange rate. Emphasis is placed on robustness testing model performance by changing its specification and how both models perform across different time periods. Based on the accuracy of the forecasts the fair value model outperforms the currency forecasting model; a finding that is not supported using directional forecasts. This is robust to changes in model specification and across different time spans that cover pre-and current financial crisis periods. It is also discovered that the evaluation criteria used and prevailing market conditions determines whether model performance translates into value added in a currency fund.
SHORTING THE BEAR: A TEST OF ANECDOTAL EVIDENCE OF INSIDER TRADING IN EARLY STAGES OF THE SUB-PRIME MARKET CRISIS
No full textThis article uses trading data in the options market for shares in The Bear Sterns Companies (BSC) during the first half of 2007 during early stages of the US sub-prime crisis as a laboratory to examine the incidence of insider trading. The principle research objective is to enhance our understanding of the extent of strong form inefficiency in equity derivative markets. The presence of illegal insiders is particularly important to predictive markets as they raise transaction costs and deter participation by outsiders, which reduce the accuracy of price signals and markets’ forecasting ability. We take the perspective of a regulator making use of hindsight to identify the most propitious periods for insider trades and to identify market activity that is indicative of insiders. Half the value of BSC options traded during the first half of 2007 were on 19 percent of the days, mostly in contracts in or close-to the money and near to expiry. We find persuasive evidence that insiders could have been active in trading Bear Sterns stock during this period
UNDERSTANDING THE PLOTT-WIT-YANG PARADOX
No full textPlott, Wit & Yang (2003) conduct a betting market experiment and find: First, information was aggregated. This suggests that traders updated their private information based on observed market odds. Second, a model based only on the use of private information seems to fit their data best. The authors call this paradoxical. Because the original data are lost, we replicate their experiment. Our results suggest that the paradox seems due to aggregate rather than individual level data analysis. We analyze the individual level data and explain the paradoxical results reported in Plott et al. (2003).We would like to thank Charles R. Plott and Peter Katuščák for invaluable comments
Transfield Shipping Inc v Mercator Shipping Inc (The “Achilleas”) [2008] 2 Lloyd's Rep 275
Get PDFREMOTENESS OF CONTRACTUAL DAMAGESOn 9 July 2008, the House of Lords handed down its decision in Transfield Shipping Inc v Mercator Shipping Inc (The “Achilleas”).1 Overturning a series of lower decisions, the House of Lords unanimously decided to restrict the damages available for the breach of a charterparty caused by the late re-delivery of the ship. The case will undoubtedly be important for those in the shipping industry, but will also be important for the development of the doctrine of remoteness of damages in contract law.
Gregson v HAE Trustees Ltd & Ors [2008] EWHC 1006 (Ch)
Get PDF“DOG-LEG” CLAIMS KICKED INTO TOUCH: BENEFICIARIES EXPOSED?The recent decision of the High Court in Gregson v HAE Trustees Ltd & Ors (“Gregson”) represents a low point for the potential sustainability of what has become known as a dog-leg claim, a hitherto rarely utilised cause of action. The essence of the dog-leg claim is this. When a trust suffers loss as a result of a breach by a corporate trustee, and that corporate trustee cannot or will not pursue its own directors to recover the losses to the settlement, a dog-leg claim recognises the right of action available to the corporate trustee as being the property of the trust. In the event that the corporate trustee fails to pursue its directors the beneficiaries may do so because the claim belongs to the trust
