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Zitzewitz, Eric

Overview
Works: 32 works in 200 publications in 2 languages and 883 library holdings
Classifications: HB1, 330.072
Publication Timeline
Key
Publications about Eric Zitzewitz
Publications by Eric Zitzewitz
Most widely held works by Eric Zitzewitz
Prediction markets by Justin Wolfers( file )
26 editions published between 2004 and 2006 in English and held by 140 libraries worldwide
Abstract: Prediction Markets, sometimes referred to as "information markets," "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research
How prediction markets can save event studies by Erik Snowberg( file )
21 editions published between 2010 and 2011 in 3 languages and held by 80 libraries worldwide
This review paper articulates the relationship between prediction market data and event studies, with a special focus on applications in political economy. Event studies have been used to address a variety of political economy questions from the economic effects of party control of government to the importance of complex rules in congressional committees. However, the results of event studies are notoriously sensitive to both choices made by researchers and external events. Specifically, event studies will generally produce different results depending on three interrelated things: which event window is chosen, the prior probability assigned to an event at the beginning of the event window, and the presence or absence of other events during the event window. In this paper we show how each of these may bias the results of event studies, and how prediction markets can mitigate these biases
What do financial markets think of war in Iraq by Andrew Leigh( Book )
11 editions published in 2003 in English and held by 73 libraries worldwide
Abstract: We analyze financial market data in order to produce an ex-ante assessment of the economic consequences of war with Iraq. The novel feature of our analysis derives from the existence of a market for Saddam Securities,' a new future traded on an online betting exchange that pays only if Saddam Hussein is ousted. A variety of tests suggest that this future's price provides a plausible estimate of the probability of war. The spot oil price has moved closely with the Saddam Security, suggesting that war raises oil prices by around $10 per barrel. Futures prices imply that markets expect these large immediate disruptions to dissipate quickly, with prices returning to pre-war levels within about a year and a half. Evidence on the long-run effects is fragile, and while prices are probably expected to fall a little as a result of war, any oil dividend' will be minimal. We find large effects in equity markets: and war lowers the value of U.S. equities by around 15 percent. This effect is concentrated in the consumer discretionary sector, airlines and IT; the prospect of war bolsters the gold and energy sectors. Analyzing option prices, we find that the large estimated average effects of war reflect the market pricing in a range of different scenarios - a 70 percent probability that it will lead to market declines of 0 to 15 percent, a 20 percent chance of 15 to 30 percent declines, and a 10 percent risk of a fall in excess of 30 percent. Across countries, the most extreme effects are on the stock markets of Turkey, Israel, and several European nations. Countries that are highly enmeshed in the world economy, or net oil importers, are most likely to experience adverse effects from war
Five open questions about prediction markets by Justin Wolfers( Book )
17 editions published in 2006 in English and held by 69 libraries worldwide
Abstract: Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decision-making and risk management -- in both the public and private sectors. This paper outlines five open questions in the literature, and we argue that resolving these questions is crucial to determining whether current optimism about prediction markets will be realized
Partisan impacts on the economy evidence from prediction markets and close elections by Erik Snowberg( file )
14 editions published in 2006 in English and held by 65 libraries worldwide
Abstract: Analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during Election Day. Analyzing high frequency financial fluctuations following the release of flawed exit poll data on Election Day 2004, and then during the vote count, we find that markets anticipated higher equity prices, interest rates and oil prices and a stronger dollar under a Bush presidency than under Kerry. A similar Republican-Democrat differential was also observed for the 2000 Bush-Gore contest. Prediction market based analyses of all Presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican President raises equity valuations by 2 3 percent, and that since Reagan, Republican Presidents have tended to raise bond yields
Interpreting prediction market prices as probabilities by Justin Wolfers( file )
17 editions published in 2006 in English and held by 61 libraries worldwide
Abstract: While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient conditions under which prediction markets prices correspond with mean beliefs. Beyond these specific sufficient conditions, we show that for a broad class of models prediction market prices are usually close to the mean beliefs of traders. The key parameters driving trading behavior in prediction markets are the degree of risk aversion and the distribution of beliefs, and we provide some novel data on the distribution of beliefs in a couple of interesting contexts. We find that prediction markets prices typically provide useful (albeit sometimes biased) estimates of average beliefs about the probability an event occurs
Retrospective vs. prospective analyses of school inputs : the case of flip charts in Kenya by Paul Glewwe( Book )
5 editions published between 2000 and 2004 in English and held by 59 libraries worldwide
Abstract: This paper compares retrospective and prospective analyses of the effect of flip charts on test scores in rural Kenyan schools. Retrospective estimates that focus on subjects for which flip charts are used suggest that flip charts raise test scores by up to 20 percent of a standard deviation. Controlling for other educational inputs does not reduce this estimate. In contrast, prospective estimators based on a study of 178 schools, half of which were randomly selected to receive charts, provide no evidence that flip charts increase test scores. One interpretation is that the retrospective results were subject to omitted variable bias despite the inclusion of control variables. If the direction of omitted variable bias were similar in other retrospective analyses of educational inputs in developing countries, the effects of inputs may be even more modest than retrospective studies suggest. Bias appears to be reduced by a differences-in-differences estimator that examines the impact of flip charts on the relative performance of students in flip chart and other subjects across schools with and without flip charts, but it is not clear that this approach is applicable more generally
Party influence in Congress and the economy by Erik Snowberg( file )
8 editions published in 2006 in English and held by 53 libraries worldwide
To understand the extent to which partisan majorities in Congress influence economic policy, we compare financial market responses in recent midterm elections to Presidential elections. We use prediction markets tracking election outcomes as a means of precisely timing and calibrating the arrival of news, allowing substantially more precise estimates than a traditional event study methodology. We find that equity values, oil prices, and Treasury yields are slightly higher with Republican majorities in Congress, and that a switch in the majority party in a chamber of Congress has an impact that is only 10-30 percent of that of the Presidency. We also find evidence inconsistent with the popular view that divided government is better for equities, finding instead that equity valuations increase monotonically, albeit slightly, with the degree of Republican control
Prediction markets for economic forecasting by Erik Snowberg( file )
16 editions published in 2012 in English and held by 51 libraries worldwide
Prediction markets--markets used to forecast future events--have been used to accurately forecast the outcome of political contests, sporting events, and, occasionally, economic outcomes. This chapter summarizes the latest research on prediction markets in order to further their utilization by economic forecasters. We show that prediction markets have a number of attractive features: they quickly incorporate new information, are largely efficient, and impervious to manipulation. Moreover, markets generally exhibit lower statistical errors than professional forecasters and polls. Finally, we show how markets can be used to both uncover the economic model behind forecasts, as well as test existing economic models
Does transparency reduce favoritism and corruption? evidence from the reform of figure skating judging by Eric Zitzewitz( file )
6 editions published in 2012 in English and held by 37 libraries worldwide
Transparency is usually thought to reduce favoritism and corruption by facilitating monitoring by outsiders, but there is concern it can have the perverse effect of facilitating collusion by insiders. In response to vote trading scandals in the 1998 and 2002 Olympics, the International Skating Union (ISU) introduced a number of changes to its judging system, including obscuring which judge issued which mark. The stated intent was to disrupt collusion by groups of judges, but this change also frustrates most attempts by outsiders to monitor judge behavior. I find that the "compatriot-judge effect", which aggregates favoritism (nationalistic bias from own-country judges) and corruption (vote trading), actually increased slightly after the reforms
Wintertime for deceptive advertising? by Jonathan Zinman( file )
8 editions published in 2012 in English and held by 36 libraries worldwide
Casual empiricism suggests that deceptive advertising about product quality is prevalent, and several classes of theories explore its causes and consequences. We provide some unusually sharp empirical evidence on the extent, mechanics, and dynamics of deceptive advertising. Ski resorts self-report substantially more natural snowfall on weekends. Resorts that plausibly reap greater benefits from exaggerating do it more. Data on website visits suggests that consumers are appropriately skeptical of weekend reports. We find little evidence that competition restrains or encourages exaggeration. Near the end of our sample period, a new iPhone application feature makes it easier for skiers share information on ski conditions in real time. Exaggeration falls sharply, especially at resorts with better iPhone reception
How much does size erode mutual fund performance? a regression discontinuity approach by Jonathan Michael Reuter( file )
6 editions published in 2010 in English and held by 36 libraries worldwide
The two main stylized facts in the mutual fund literature are that funds exhibit little ability to persistently outperform their peers, but new money flows into funds with the highest past returns. The traditional interpretations of these facts are that fund managers are unskilled and fund investors are unsophisticated. Berk and Green (2004) use a model that combines skilled managers with diseconomies of scale in asset management to challenge these interpretations. They argue that more-skilled managers will manage more assets but--precisely because they manage more assets--will generate the same expected future returns as less-skilled managers. In their model, standard cross-sectional regressions of fund returns on fund size will significantly underestimate diseconomies of scale. To identify the causal impact of mutual fund flows on performance, we exploit the fact that small differences in mutual fund returns can cause discrete changes in Morningstar ratings and, thereby, cause discrete differences in mutual fund flows. The diseconomies of scale that we estimate using this regression discontinuity approach are larger than those estimated in standard regressions, but generally smaller than assumed in Berk and Green--or than are required to explain the low observed levels of performance persistence
Insurance as delegated purchasing theory and evidence from health care by Robin McKnight( file )
6 editions published in 2012 in English and held by 36 libraries worldwide
Household demand for actuarially unfair insurance against small risks has long puzzled economists. One way to potentially rationalize this demand is to recognize that (non-life) insurance is an incentive-compatible means of engaging an expert buyer. To quantify the benefits of expert buying, we compare prices paid by the insured and uninsured for health care. In categories of health care where uncompensated care is more difficult to obtain (drugs, doctor office visits, and hospital outpatient visits), we find that insurers pay 10-20% less than the uninsured. For forms of care where payment by the uninsured is more likely to be negotiated after services are rendered (hospitalizations and emergency room visits) the uninsured pay about 30% less on average, due largely to the nontrivial share of uninsured who pay 5% or less of their billed charges. At least in settings where free services are difficult to obtain, expert buying is an important benefit of insurance. We discuss the implications of the delegated-purchasing view of insurance for con-sumer-driven health insurance and for self-insurance by employers
Should benchmark indices have alpha? revisiting performance evaluation by Martijn Cremers( file )
6 editions published in 2012 in English and held by 32 libraries worldwide
Standard Fama-French and Carhart models produce economically and statistically significant nonzero alphas, even for passive benchmark indices such as the S&P 500 and Russell 2000. We find that these alphas arise primarily from the disproportionate weight the Fama-French factors place on small value stocks, which have performed well, and from the CRSP value-weighted market index, which is historically a downward-biased benchmark for U.S. stocks. We propose small methodological changes to the Fama-French factors to eliminate the nonzero alphas, and we also propose factor models based on common and tradable benchmark indices. Both kinds of alternative models improve performance evaluation of actively managed portfolios, with the index-based models exhibiting the best performance
Domestic competition, cyclical fluctuations, and long-run growth in Hong Kong SAR by Eric Zitzewitz( Book )
6 editions published in 2000 in English and held by 26 libraries worldwide
Hong Kong SAR has traditionally been viewed as having highly competitive product and factor markets. Competition has been credited not only with contributing to high long-run output and productivity growth but also with providing a supporting framework for rapid price adjustment in response to economic shocks while maintaining a fixed exchange rate. Given the importance of competition, surprisingly little systematic empirical work has been done in evaluating the degree of competition in Hong Kong SAR's industries. While prices have historically adjusted much more rapidly in response to shocks in Hong Kong SAR than in OECD economies (Box 1), many observers in recent years have raised questions about the degree of domestic competition, particularly in light of the economy becoming increasingly dominated by service industries.2
Extending the East Asian Miracle : microeconomic evidence from Korea by Martin Neil Baily( Article )
3 editions published between 1998 and 1999 in English and held by 4 libraries worldwide
Interpreting prediction market prices as probabilities ( Computer File )
3 editions published in 2006 in English and held by 3 libraries worldwide
While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient conditions under which prediction markets prices correspond with mean beliefs. Beyond these specific sufficient conditions, we show that for a broad class of models prediction market prices are usually close to the mean beliefs of traders. The key parameters driving trading behavior in prediction markets are the degree of risk aversion and the distribution on beliefs, and we provide some novel data on the distribution of beliefs in a couple of interesting contexts. We find that prediction markets prices typically provide useful (albeit sometimes biased) estimates of average beliefs about the probability an event occurs. -- Manski ; information market ; event future ; options ; futures ; binary option
Five open questions about prediction markets ( Computer File )
3 editions published in 2006 in English and held by 3 libraries worldwide
Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decision-making and risk management -- in both the public and private sectors. This paper outlines five open questions in the literature, and we argue that resolving these questions is crucial to determining whether current optimism about prediction markets will be realized. -- prediction markets ; information markets ; event futures ; political forecasting ; prediction IVs
Partisan impacts on the economy : evidence from prediction markets and close elections ( Computer File )
3 editions published in 2006 in English and held by 3 libraries worldwide
Political economists interested in discerning the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day. Analyzing high frequency financial fluctuations on November 2 and 3 in 2004, we find that markets anticipated higher equity prices, interest rates and oil prices and a stronger dollar under a Bush presidency than under Kerry. A similar Republican-Democrat differential was also observed for the 2000 Bush-Gore contest. Prediction market based analyses of all Presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican President raises equity valuations by 2-3 percent, and that since Reagan, Republican Presidents have tended to raise bond yields. -- elections ; prediction markets ; political economy ; event study ; partisan effects
Prediction markets in theory and practice ( Computer File )
3 editions published in 2006 in English and held by 3 libraries worldwide
Prediction Markets, sometimes referred to as "information markets", "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research. -- prediction markets ; information markets ; information aggregation
 
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Alternative Names
Zitzewitz, Eric W.
Languages
English (186)
German (1)
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