The minimum price increment in a prediction market that doubles as a narrative unit: because contracts resolve at $0 or $1, each one-cent move is universally read as a one-percentage-point probability revision, making microstructure noise appear informative.
Cluster: Liquidity & Trading
The minimum price increment in a prediction market that doubles as a narrative unit: because contracts resolve at $0 or $1, each one-cent move is universally read as a one-percentage-point probability revision, making microstructure noise appear informative.
Referenced in 2 articles
Analyzes 36,777 Polymarket events to understand what happens when continuous questions are split into dozens of independent binary contracts. Volume follows an extreme Pareto distribution: the top 3 markets capture over 75% of trading activity regardless of event size, leaving a large fraction as untradeable ghost markets. The $0.01 tick size compounds the problem, creating a rounding tax that makes low-probability contracts structurally imprecise.
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.