2026/03/03 by Kwok Ping Tsang, Zichao Yang
#econ.GN #q-fin.EC
What do trading and prices each reveal when political news hits a prediction market? We answer using Polymarket's on-chain ledger around three shocks in the 2024 U.S. presidential election: the Biden-Trump debate, the assassination attempt on Trump, and Biden's withdrawal. Trading rises after every shock, mainly among incumbents with greater prior activity and with larger realized gains on pre-event portfolios. Price adjustment differs across shocks. The debate's price increase largely reverses, the assassination-attempt repricing persists, and Biden's withdrawal generates the heaviest trading with little change in the Trump price. The price response tracks what the news reveals about linked candidates and how much was already anticipated, not the amount of trading. Trading volume measures participation, while belief revision must be read from linked outcome prices and the surprise in the news.