Wahlstreet

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The Wahlstreet was a forecast market for the federal and state elections up to the federal election in September 2009.

Theoretical background

The idea of ​​forecast markets is based on a hypothesis that the prominent Austrian economist and Nobel Prize winner Friedrich August von Hayek formulated as early as 1945. According to von Hayek, markets also optimally aggregate information that is incomplete and asymmetrically distributed. This means that the market uses the price to provide the best forecast at all times. Particular attention is paid to the fact that the market offers financial incentives for the participants to bring further information into the market and at the same time can prevent distortions - for example through personal preferences or social desirability .

history

The first testing and application of this theoretical concept for forecasts was the so-called Iowa Electronic Market, which was started for the first time for the US presidential election in 1988 and has since been offering forecasting markets for various US elections.

In 1997/1998, the first web-based solution for such a forecast stock market was published in a project by Die Zeit and the Berliner Tagesspiegel in cooperation with the Oldenburg company ECCE TERRAM in the run-up to the Lower Saxony state election in 1998. This project, initially conceived only as a feasibility study, was subsequently further developed and then known to a larger audience for the first time under the name Wahlstreet for the 1998 Bundestag election . As a result, the “Wahlstreet” was repeatedly open for Bundestag and Landtag elections and sometimes produced very good forecast results, which were sometimes even more precise than the forecasts of established opinion research institutes. Over time, other providers such as B. the Handelsblatt and the Neue Osnabrücker Zeitung on the project.

In 2005 there was not only speculation on Wahlstreet about the outcome of the election for the parties. There were additional markets where one could speculate about the government coalition and the Federal Chancellor , supplemented by the question of whether Paul Kirchhof or Edmund Stoiber or both would be represented as ministers in the coming government.

After the federal election in 2009 Wahlstreet was apparently closed.

Functionality and requirements

At its core, the process of a forecast stock market consists in the participants exchanging their opinions on the outcome of an event, in this case a political choice, in the form of securities. In contrast to the question of voting intent, which is primarily used in political opinion research - the so-called Sunday question (who would you vote if there was an election next Sunday?) - the question of election expectation is implicitly asked.

Conditions for this are:

  • There is a personal profit intention of the participant. For this reason, especially in the first few years, forecast stock markets were carried out in such a way that the participants deposited money in order to trade with it like on a stock exchange and to generate returns.
  • The result can be shown in numbers, for example 55% of the votes cast, 702 points awarded during a Formula 1 season, etc.
  • There is an objectively ascertainable result, for example by announcing the Federal Returning Officer.

Each participant has the opportunity to purchase a certain amount - in the case of Wahlstreet 2009, for example, an amount between 5 and 50 euros - securities of a party or a candidate at a certain trading price. It is crucial for the market's forecasting performance that the final payout rate is based on the actual election result instead of the trading rate. This creates an incentive for traders to buy stocks from what they believe to be undervalued parties and to distance themselves from what they believe to be overvalued securities.

Since each player has an individual environment and their own methods of political information, each participant has a unique piece of information, so that a large amount of information about different voting intentions flows into it. As a result, the resulting price equilibrium then approaches the election result in such a way that the trading price provides a comparatively exact forecast of the election outcome.

Factors influencing forecast performance

A representative sample of the population is therefore not required for forecast markets, so that good forecasts can be achieved with just a few voluntary participants. The total amount of information that is ultimately contained in the market also has a certain influence on the forecast performance, but the intensity of trading is more decisive. To ensure this, a number of participants between at least 250 and 2500 participants is usually aimed for. But forecast stock markets with 25,000 participants and more have also been carried out. In general, active participation is seen as a success factor. Furthermore, it is assumed that the increasing availability of political information has a positive influence on the accuracy of the forecast. Another factor influencing the forecast quality is the avoidance of disruptive influences such as manipulation or dealer agreements.

The election street for the 2009 Bundestag election

The election street for the 2009 Bundestag election was mainly carried out as part of a research internship at the Institute for Sociology at the Ludwig Maximilians University in Munich . In the run-up to the 2009 Bundestag elections, trading took place on three different markets, a "party market", in which the established parties had second votes, a "Chancellor market", in which the future Federal Chancellor was chosen according to the "winner takes all" principle , and a market in which the players can bet on the future government coalition. The markets functioned according to the above principles and with stakes between 5 and 50 euros. A decisive innovation of Wahlstreet 2009 was that within the framework of the research internship outlined above - with the help of a large-scale telephone survey - the prognosis performance of the election exchange with the prognosis performance of conventional instruments and a new "election expectation question", based on the findings of James Surowiecki , which this one in his Book The Wisdom of the Many has been compared.

Other possible uses for forecast markets

Other areas of application were, for example, sports exchanges, the forecast of interest or exchange rate developments or market research. The process was also used by other providers such as B. T-Online , SAT.1 or Financial Times Deutschland are used to create forecasts. The instrument can also be used for internal company purposes, for example as an instrument for project controlling or for medium and long-term needs assessments.

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Web links

  • Wahlstreet. Archived from the original on September 26, 2009 ; accessed on August 23, 2013 .
  • Handelsblatt forecast exchange (accessed August 26, 2013)