[gowld]

The whole premise of prediction markets is that the few people whose perception do match outcomes make bets to push the money-weighted average perception toward outcomes. If perceptions still don't match outcomes at that point, average return is 0 minus transactions, with high variance.

[kristopolous]

huh? that sounds like ideology and not empirical observation.

[bofadeez]

That's just how limit order books work with mark-to-market pricing

[xrisk]

Could you point me towards some resource that would help me understand what you wrote? Genuinely curious about how this stuff works

[eru]

https://en.wikipedia.org/wiki/Efficient-market_hypothesis might be a good start.

[kristopolous]

That's pure ideology and not empirical. There's you know, even a large section there in that article pointing that out

[eru]

The index fund industry would like to have a word with you.

[bofadeez]

Step 2: https://en.wikipedia.org/wiki/Grossman%E2%80%93Stiglitz_para...

[eru]

Yes, but I always found that objection a bit silly. It's like pointing out that real cows are obviously not perfect spheres nor do they live in a vacuum.

> [...] if prices perfectly reflected available information, there is no profit to gathering information, in which case there would be little reason to trade and markets would eventually collapse.[2]

That's a stupid way to formulate this. Markets wouldn't "collapse". They would get slightly less efficient until equilibrium is restored to where arbitragers can make enough money to keep prices at that level of efficiency.