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autoexec 1 hours ago [-]
> The findings challenge the idea that prediction markets work because of crowds. They appear to work because of who is informed.
That sounds about right. A small number of people with inside info are gaming the system itself and everybody else is just gambling.
PaulHoule 49 minutes ago [-]
People who work in mainstream financial markets (e.g. stocks) believe pretty much the same thing: the vast majority of people are uninformed and contribute Brownian motion whereas just a few people know something and they move markets.
That sounds about right. A small number of people with inside info are gaming the system itself and everybody else is just gambling.
https://ideas.repec.org/p/pra/mprapa/24487.html
https://arxiv.org/abs/2501.03658
Notably market makers can make money off the noise injected by uninformed traders but would not trade with informed traders if they could help it.