Prediction Markets: Know the Future, Prepare for the Future

How much of the future can a market know?

Prediction markets turn information and expectations about events that have not yet happened—elections, recessions, company sales, disasters, and policy changes—into a single market price.

But that price is not a crystal ball. It reflects not only forecasts, but also demand for hedging, attitudes toward risk, funding constraints, and liquidity. A contract priced at ¥70 does not necessarily represent an objective 70 percent probability.

This forthcoming Japanese-language Kindle book approaches prediction markets as both markets for learning about the future and markets for preparing for it. Through election markets, corporate prediction markets, event contracts, AI, market makers, and regulation, it asks when forecasting and hedging reinforce each other, when they conflict, and how prediction markets might be used in Japan.

Contents

Prologue: Knowing the Future, Preparing for the Future

Part I: What Are Prediction Markets?

• Chapter 1: Trading Future Events
• Chapter 2: One Contract, Two Values—Forecasting and Hedging
• Chapter 3: Does ¥70 Mean 70%?
• Chapter 4: How Are They Different from Gambling, Insurance, and Derivatives?

Part II: What Can Prediction Markets Do?

• Chapter 5: Election Markets and Opinion Polls
• Chapter 6: Asking Employees About the Company’s Future
• Chapter 7: Beyond Forecasting—Event Contracts as Hedges
• Chapter 8: Experts, Crowds, and AI

Part III: Designing Markets

• Chapter 9: Good Forecast Questions, Bad Forecast Questions
• Chapter 10: Where Does Liquidity Come From?
• Chapter 11: Manipulation, Insiders, and Bubbles

Part IV: Where Are Prediction Markets Going?

• Chapter 12: Institutional Models Developed Primarily in the United States
• Chapter 13: What Can Japan Use Them For?

Epilogue: Does the Market Know the Future?