“Prediction markets' one-cent minimum price moves create narrative overreactions that fade strategies can harvest”
Analyzes 600 million Polymarket orderbook datapoints, finding ~70% of one-cent price moves do not continue in the same direction. Coins 'semantic tick size' to describe how a prediction market's minimum price increment doubles as a narrative unit—each penny reads as a one-percentage-point probability change, creating overreactions that a contrarian fade strategy can profitably harvest. Frames this against Tetlock's TradeSports microstructure research, where passive limit order walls slow price discovery while impatient market orders amplify short-term noise.
Some technical background helpful
Platforms mentioned: Polymarket