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"The mechanism is correct"


Handelsblatt: Mr. Fahrinkrug, you already are traded on the prediction markets?

Holger Fahrinkrug: Not today. Otherwise, I act almost daily. I usually do it at night, even if my woman is not so enthusiastic.

HB: Why do you do?

Fahrinkrug: As an economist I have a professional interest, I see the sport as well. I have to cut the ambition as well.

HB: What’s important?

Fahrinkrug: You really need two genes to be successful. For one of the analysts to make good forecasts. On the other hand, the skills of the dealer when it comes to dealing with risk and the allocation of capital. Because of the low liquidity can, for example, with short-term trading rotate much

HB: What do you mean?

The trading volume is relatively low because there are not many participants. A result, prices fluctuate more short term and one can buy and sell quickly to make profits.

HB: Can lead to good results, the prediction markets?

Fahrinkrug: Yes, other Prediction markets have shown before important elections. The predictions were good there. The mechanism is therefore correct, but still have some teething problems are resolved.

HB: What?

Fahrinkrug: A problem is the different weighting of the indicators. With bets on exports much higher profits are possible, as with other indicators. The distorted the result. I guess the first ten to fifteen players in the rankings their profits earned from export bets.

HB: Why?

Who is betting on the development of exports, and with his forecast is correct, you get a higher payout than if he bet on unemployment and correctly located.

HB: And what do you suggest for improvement?

Fahrinkrug: I would take out the exports from the standings. There are also too many random fluctuations. Another problem is the liquidity issue?

HB: What’s it all about?

Fahrinkrug: So far, it’s like that come through each payment more units of money into the game. This is reflected in the prices and means that most courses are overvalued. It is a good example of how one can well understand the basis of the prediction markets many of the processes of reality. After all, there is: the permanent nachschießen liquidity leads to an inflation problem. Without short selling, the effect would be even more extreme.

HB: The Short-selling is currently so politically controversial?

Fahrinkrug: Yes, exactly. For the prediction markets, it is very reasonable and it should be expanded because it counteracts course exaggerations.