tailieunhanh - Manipulating Political Stock Markets: A Field Experiment and a Century of Observational Data*

The evidence so far indicates a persistent pattern of lunar-cycle effects in . and international stock returns. However, the combination of high standard deviation of daily returns and relatively short time series results in insufficient statistical significance at the individual stock index level. In Panel B of Table 5 we use the cross-section of international stock data to offer more powerful tests of the lunar cycle effect. Specifically, in the first part of Panel B we pool all data for the G-7 countries together and compute the same statistics. Essentially, this test treats all stock. | Manipulating Political Stock Markets À T 1 1 1 -B-l J 1 A Ể ZX A 1 TV A A Field Experiment and a Century of Observational Data Paul W. Rhode Koleman S. Strumpf Univ. of Arizona and NBER Univ. of Kansas School of Business January 2007 Preliminary Abstract Political stock markets have a long history in the United States. Organized prediction markets for Presidential elections have operated on Wall Street 1880-1944 the Iowa Electronic Market 1988-present and TradeSports 2001-present . Proponents claim such markets efficiently aggregate information and provide forecasts superior to polls. An important counterclaim is that such markets may be subject to manipulation by interested parties. We analyze this argument by studying alleged and actual speculative attacks large trades uninformed by fundamentals intended to change prices in these three markets. We first examine the historical Wall Street markets where political operatives from the contending parties actively and openly bet on city state and national races the record is rife with accusations that parties tried to boost their candidates through investments and wash bets. Next we report the results of a field experiment involving a series of planned random investments-- accounting for two percent of total market volume-- in the Iowa Electronic Market in 2000. Finally we investigate the speculative attacks on TradeSports market in 2004 when a single trader made a series of large investments in an apparent attempt to make one candidate appear stronger. In the cases studied here the speculative attack initially moved prices but these changes were quickly undone and prices returned close to their previous levels. We find little evidence that political stock markets can be systematically manipulated beyond short time periods. We thank Tim Groseclose Robin Hanson Donald Luskin Tom Mroz Sergio Parreiras Marco Ottaviani Charles Plott David Primo Mark Stegeman Justin Wolfers participants at the DIMACS Workshop on Markets as