How Accurate Is Polymarket? Research Shows a 90% Success Rate

New research has shed light on the impressive accuracy of Polymarket, a blockchain-based prediction platform. Conducted by New York data scientist Alex McCullough, the findings reveal that Polymarket boasts an accuracy rate of at least 90%. McCullough’s analysis is available through a detailed dashboard on Dune, tracking the platform’s accuracy over various time frames leading up to market resolutions.

Findings on Accuracy Rates

In McCullough’s assessment, Polymarket demonstrated a remarkable accuracy of 90.5% one month prior to markets resolving, followed closely by 89.2% accuracy one week out, and 88.6% accuracy 24 hours before resolution. Notably, the accuracy increased to 90.2% with just 12 hours remaining, peaking at 94.2% accuracy in the last four hours before market resolution.

In an interview with Polymarket’s blog, The Oracle, McCullough explained the rationale behind his selected time frames, indicating that they provided the most compelling data. He noted that the four-hour mark is critical, as markets may not resolve instantly, sometimes taking days post-event for resolution.

Methodology of Accuracy Measurement

McCullough’s method for determining accuracy involved counting markets that had an implied probability above 50% that resolved to either "Yes" or "No." Additionally, he carefully analyzed Polymarket’s historical data, expunging extreme probabilities to ensure a more accurate representation of the platform’s performance.

Increasing Accuracy Over Time

An intriguing aspect of McCullough’s findings indicates that prediction markets tend to become more accurate as they evolve over time. However, this increased accuracy is only evident in the data as the markets approach resolution—specifically evident in the final four hours. While Polymarket often provides correct predictions, McCullough identified various biases that can influence the outcomes.

The biases identified include:

• Herd Mentality: A tendency for market participants to follow the actions of others rather than make independent assessments.
• Low Liquidity: Insufficient trading volumes can lead to mispriced outcomes.
• Acquiescence Bias: The inclination to agree with prevailing opinions can skew perception towards overestimating the likelihood of events.

These factors contribute to a tendency for market odds to reflect a slightly inflated likelihood of most events, leading to "Yes" outcomes occurring less frequently than anticipated.

When discussing why longer-term predictions outperform those nearing resolution, McCullough noted that extended markets often include options that, when analyzed, clearly indicate outcomes, such as a hypothetical chance of Gavin Newsom becoming president, which he cited as an example of certainty in long-term predictions.

Overall, this research reinforces Polymarket’s significance as a robust prediction market where the provided insights may serve not only for individual bettors but also for a broader understanding of crowd-sourced forecasting as a discipline.