Trading Shares in Geniuses and Heroes
September 29, 2004
Buy shares in Bob Dylan and Kofi Annan, or sell shares in Helmut Kohl. It's all possible at a new Internet-based virtual stock market (VSM) aimed at predicting who will be among the next Nobel Prize winners.
The VSM is an economic experiment by the University of Frankfurt, to see how well short- and medium-term market developments can be predicted. The stocks in Nobel candidates represent a bet on the outcome of future market situations -- the higher the value of the stock, the more probable the market situation is.
The participants in the Nobel VSM don't have to concern themselves with economic models, however. Nor is any real money riding on this particular stock market. But the most successful investors stand to win dividends in the form of 50 prizes, including an IBM laptop.
Kohl stocks suffering
Internet users have to register to take part in the virtual market. Each participant then receives an initial cash deposit of $10,000 (€12,300) that can be used for buying and selling stocks. Just like a real market, the price of the stocks rises and falls according to supply and demand.
Stock in former German Chancellor Helmut Kohl (photo) as a candidate for the Peace Prize, for example, is going cheap, having dropped 16 percent from its initial offering price of $10. In contrast, demand for shares in top runner Pope John Paul II has skyrocketed. His stock is currently trading at over $70.
Trading at the Nobel Prize Market wraps up at 6 p.m. the day before the winners are announced -- that will happen on Oct. 8 at the earliest. Once the Nobel laureates are made known, the stocks are cashed out, with every share in a winner valued at $1,000. The participant with highest account balance wins the market.
Reliable predictors
Frankfurt University's project leader for the Nobel Prize Market, Bernd Skiera, says VSM's are increasingly establishing themselves as reliable predictors of future events. Their results are frequently just as good or better than comparable predictors such as polls, Skiera said.
Political stock markets, for example, are used to predict election results in countries such as the United States, Germany, Canada, the Netherlands and Austria.
Slightly more macabre, perhaps, is the virtual Terror Stock Market, Terror Xchange, where users buy or sell virtual shares of major international news events they think are likely to occur.