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May 26, 2014 | by  | in News |
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iPredict, you predict, we all predict

For the past two years, iPredict has graced the pages of this magazine with predictions, from whether or not David Cunliffe will shave his beard before the next caucus meeting to who will win the Democratic Party’s nomination to run for US President in 2016 (#hillary2016). Using the combined wisdom of over 7000 traders, iPredict works as a forecaster to predict the outcome of social, economic, and political events.

Launched two months before the 2008 election for research purposes, iPredict remains New Zealand’s only prediction market. iPredict is wholly owned by Victoria University and is staffed by students of the University. With a record for accuracy surpassing traditional political polling, iPredict is an innovative tool for gauging public opinion.

How does it work?
iPredict allows traders to buy stocks in contracts based on real-world events. The price of each of these stocks is between $0 and $1, and is dictated by how likely that event is to occur. For example, iPredict currently has a contract on the New Zealand Prime Minister following the next General Election being from the National Party. This contract is currently priced at $0.71, which means there is a 71 per cent probability that the Prime Minister after this year’s election will be from the National Party. If traders believe the probability of the event in the contract occurring is higher than its current price, they can buy shares in that contract for the price it is trading at, in this case $0.71, which would lift the price and thus the probability. If you have shares in that contract come election time and John Key is elected for a third term, each share in that contract will pay out $1.

How does iPredict stack up?
iPredict enjoys an impressive record of accuracy when compared to traditional political polls. In 2008, 19 polls were published in the 60 days between iPredict’s launch and Election Day. Of those polls, iPredict was more accurate 15 of 19 times (a 79 per cent success rate). In 2011, iPredict increased its accuracy over the 51 election polls carried out in the lead-up to the 2011 General Election. Of the 51 polls, iPredict proved more accurate in 42, which equates to a success rate of 82.4 per cent. Unlike traditional polling, iPredict traders are required to put their money where their mouth is, which works to increase the accuracy of iPredict predictions.

Can iPredict be manipulated?
An important question facing any claims of accuracy is whether these predictions can be manipulated by those who are set to gain from a specific outcome. Market manipulation on iPredict is not possible, as shown from evidence of previous attempts. Any trader who intentionally trades in such a way as to try to distort the prediction will actually just create an opportunity for another trader to profit. Attempts to manipulate iPredict’s predictions never last long and inevitably end up with the manipulator losing a lot of money.

It’s election year; what does iPredict have in the pipeline?
Already, iPredict has contracts on all 71 New Zealand electorates (including Kelston and Upper Harbour, which were created following the boundary changes). In addition to the electorates, iPredict has contracts on the next Prime Minister, the predicted turnout, major/minor party vote share, and stacks of other election-related topics (you can find these under the ‘NZ Election 2014’ category). Last election, iPredict ran contracts on the probability of changing electorate vote majorities, as well as make-up of the government post-election, and these are likely to return this year. In the coming months, iPredict will be launching contracts on issues related to the election campaign, as well as contracts on electoral majorities.

How do I get involved?
It’s pretty easy to get involved on iPredict. Head along to www.ipredict.co.nz and click the bright orange ‘Sign Up’ button. Simply follow the steps to create an account, activate it, and then credit it with as little as $10 to get started.

If after reading this you’re still a little bit confused, don’t panic. Visit www.ipredict.co.nz and check out the tutorials page. There you’ll find tutorials on the basics, from making your first trade, to an introduction on the forever-confusing world of short selling. Alternatively, you can email iPredict on admin@ipredict.co.nz or tweet us @iPredictNZ with any other questions.

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