On the Hollywood Stock Exchange, or HSX, you can trade virtual shares of Julia Roberts or Jurassic Park III. On the Foresight Exchange you can bid on when there will be a cure for AIDS. It's not just fun and games. These play markets yield surprisingly accurate predictions, say David Pennock and his fellow computer scientists at the NEC Research Institute in New Jersey.
For instance, traders on the HSX assign dollar values to movies based on their anticipated box-office draw or likelihood of winning awards. "There was a 94 percent correlation between the price on the HSX and the actual box-office earnings," says Pennock. And the highest-priced actors won six of the eight main categories in this year's Oscars. Shares on the Foresight Exchange, which are pegged to the odds that science predictions will be proven, appear similarly prescient. On average, claims priced 20 cents or 80 cents ended up true about 20 percent or 80 percent of the time.
Pennock thinks artificial markets are such good forecasters because they tap into the collective knowledge of a huge number of informed players who want to show off their smarts. He believes the exchanges are at least as effective as polling in reading future trends. Movie executives are already keeping a close eye on the HSX ticker on the exchange's headquarters in West Hollywood.
