Forecasting the Outcome of Closed-Door Decisions: evidence from 500 years of betting on papal conclaves October 2014 Leighton Vaughan Williams Professor of Economics and Finance Nottingham Business School Nottingham Trent University Burton Street Nottingham NG1 4BU United Kingdom Tel: +44 115 848 6150 Email:
[email protected] David Paton* Professor of Industrial Economics Nottingham University Business School Wollaton Road Nottingham NG8 1BB United Kingdom Tel: +44 115 846 6601 Fax: +44 115 846 6667 Email:
[email protected] * corresponding author Acknowledgements We would like to thank participants at a Nottingham Trent University Staff Seminar and at Georgia State University’s ‘Center for the Economic Analysis of Risk’ Workshop, held in January, 2014 at the University of Cape Town, for several helpful comments and suggestions. Forecasting the Outcome of Closed-Door Decisions: evidence from 500 years of betting on papal conclaves. Abstract Closed-door decisions may be defined as decisions in which the outcome is determined by a limited number of decision-makers and where the process is shrouded in at least some secrecy. In this paper, we examine the use of betting markets to forecast on particular closed- door decision, the election of the Pope. Within the context of 500 years of papal election betting, we employ a unique dataset of betting on the 2013 papal election to investigate how new public information is incorporated into the betting odds. Our results suggest that the market was generally unable to incorporate effectively such information. We venture some possible explanations for our findings and offer suggestions for further research into the prediction and predictability of other ‘closed-door’ decisions.