The prediction market literature proposes that markets efficiently incorporate all available information. In contrast, behavioral finance assumes individual decision-making biases affect financial markets. We examine both using Iowa Electronic Market (IEM) data. We ask whether markets appear...

Prediction markets for future events are increasingly common and they often trade several contracts for the same event. This paper considers the distribution of a normative risk-neutral trader who, given any portfolio of contracts traded on the event, would choose not to reallocate that...