Title:      How Prediction Markets can Save Event Studies

Authors:    Eirk Snowberg, Justin Wolfers, Eric Zitzewitz

Entrydate:  2009-01-16 11:22:12

Keywords:   

Abstract:   Abstract Event studies have been used to address a
variety of political 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.

http://polmeth.wustl.edu/retrieve.php?id=886

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