Forecasting Uncertain Events with Small Groups

16 Pages Posted: 20 Aug 2001

See all articles by Kay-Yut Chen

Kay-Yut Chen

University of Texas at Arlington

Leslie R. Fine

Hewlett-Packard Laboratories

Bernardo A. Huberman

CableLabs

Date Written: July 2001

Abstract

We present a novel methodology for predicting future outcomes that uses small numbers of individuals participating in an imperfect information market. By determining their risk attitudes and performing a nonlinear aggregation of their predictions, we are able to assess the probability of the future outcome of an uncertain event and compare it to both the objective probability of its occurrence and the performance of the market as a whole. Experiments show that this nonlinear aggregation mechanism vastly outperforms both the imperfect market and the best of the participants.

Keywords: information aggregation, forecasts, information markets

JEL Classification: D7, D8

Suggested Citation

Chen, Kay-Yut and Fine, Leslie R. and Huberman, Bernardo A., Forecasting Uncertain Events with Small Groups (July 2001). Available at SSRN: https://ssrn.com/abstract=278601 or http://dx.doi.org/10.2139/ssrn.278601

Kay-Yut Chen

University of Texas at Arlington ( email )

Arlington, TX
United States

Leslie R. Fine

Hewlett-Packard Laboratories ( email )

1501 Page Mill Road
Palo Alto, CA 94301
United States

Bernardo A. Huberman (Contact Author)

CableLabs ( email )

400 W California Ave
Sunnyvale, CA 94086
United States

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