The ability of individuals and groups to forecast a future event, with incomplete information, by using the trading history of an asset market is analyzed in the laboratory. The results show: (1) when forecasters observe the summary of markettransacted prices, they do not perform as well as when they are provided with a complete real-time sequence of bids, asks and contract prices; (2) groups do not outperform individuals in forecasting, and when the market does not have price manipulation incentives, individual prediction is better than the group prediction; (3) in markets with manipulators, where only a summary of contract prices is provided, both groups and individuals are unable to predict better than flipping a coin. This inability to aggregate information is remedied when forecasters see the complete evolution of market bids, asks and contracts.
Tila, D. and Porter, D. (2008). Group prediction in information markets with and without trading information and price manipulation incentives. ESI Working Paper 08-04. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/145