Political prediction markets provide one of the most immediate sources of feedback on developing news. Sometimes, political prediction markets will “discover information” indicating an important event before news breaks. Intrade odds on Saddam Hussein’s capture and Romney’s selection of Paul Ryan as his running mate, for example, spiked days before the events occurred. More recently, the PredictIt market on Trump’s nominee for Secretary of Homeland Security surged a day before the announcement of John Kelly was leaked to the press.
Once news breaks, movement in the markets provides an immediate indication of what the event means and how investors believe it will impact an array of other developments. Reactions in political prediction markets may differ from those insights and analysis featured on 24-hour news shows and other sources of instant analysis. These differences may reflect the fact that investors are generally motivated by a personal profit motive while news media weight ratings and reputational risks in their coverage decisions.