Evercore ISI outlines a formula for when prediction markets are most useful

Evercore ISI strategists say prediction markets are most useful when contracts have high trading volume, short time to expiration, and simple questions with clear resolution rules. In a May 17 report, they argued higher-volume contracts tend to generate more dependable probabilities than thin markets, while markets closer to termination often show stronger signals. They also cautioned that many markets remain low-volume and can be distorted by mixed trader motives or large orders in shallow markets.