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Prediction markets, where people bet on everything from the likelihood that a movie will be a hit to the chance that a politician will become president to whether the stock market will go up or down, are in vogue. Research papers have been written on their accuracy, and the media likes to write about how these predictions often beat the purported experts.
But they are not perfect. Markets require babysitters. Someone has to set them up and ensure that the traders' money -- in cases where people are, for example, buying shares of stock -- exchanges hands in an orderly way. Wharton professors Albert Saiz and Uri Simonsohn have found a cheaper way to deliver some of the same benefits. It's called an Internet search.
Specifically, Saiz, in the real estate department, and Simonsohn, in operations and information management, argue in a new research paper that the likelihood that a topic is discussed online, in relation to a given location, correlates with its relative prevalence in the real world.
Predictions and Perceptions: Downloading Wisdom from Online Crowds - Knowledge@Wharton
