We introduce a new method for converting individual probability estimates (obtained through surveys) into market orders for use in a Continuous Double Auction prediction market. Our Survey-Powered Market Agent (SPMA) algorithm is based on actual forecaster behavior, and offers notable advantages over existing market agent algorithms such as Zero Intelligence Plus (ZIP) agents: SPMAs only require probability estimates (and not bid direction nor quantity), are more behaviorally realistic, and work well when probabilities change over time. We validate SPMA using prediction market data and probability estimates elicited through surveys from a large set of forecasters on 88 individual forecasting problems over the course of a year. SPMA outperforms simple averages of the same probability forecasts and is competitive with sophisticated opinion poll aggregation methods and prediction markets. We use a rich set of market and poll data to empirically test the assumptions behind SPMA’s operation. In addition to aggregation efficiency, SPMA provides a framework for studying how forecasters convert probability estimates into trading orders, and offers a foundation for building hybrid markets which mix market traders and individuals producing independent probability estimates.
