<p>Stock price is reflecting some expected present value of the worth of a company, even if it isn't totally that way. Because of the presence of risk, people do not know the future value of the stock, and sorting out that risk is reflected through options pricing. People have the option to lock in certain purchases at a fixed price, but some people may sell that option away rather than complete a purchase.</p>
<p>The price of a stock isn't all noise or all signal. If people were allowed to bet on the price of a stock outside of the stock market, the price may not match the price of the security on the regular market. One reason may be that different agents trading for different reasons may have different momentum pricing patterns. See more about <a href="https://www.sciencedirect.com/science/article/abs/pii/S0304405X18301351" rel="nofollow noreferrer">intraday momentum pricing</a>. This is just one angle I think of, but there's other reasons why the prices may not match.</p>
<p>Suggested reading:</p>
<ul>
<li><p>Gao, Lei, Yufeng Han, Sophia Zhengzi Li, and Guofu Zhou. &quot;Market
intraday momentum.&quot; Journal of Financial Economics 129, no. 2 (2018):
394-414.</p>
</li>
<li><p>Baltussen, Guido, Zhi Da, Sten Lammers, and Martin Martens. &quot;Hedging demand and market intraday momentum.&quot; Journal of Financial Economics 142, no. 1 (2021): 377-403.</p>
</li>
</ul>

CC BY-SA 4.0
2024-12-10T18:23:55.533Z
2024-12-10T18:23:55.533Z
Kitsune Cavalry
<p>Recently, firms such as Polymarket allow users to take bets on external events such as elections, criminal investigations, etc. Suppose that Polymarket allowed bets on external financial securities, for example AMZN, Bitcoin, etc.</p>
<p>Some stocks pay dividends provided that firms are able to do so. Consumers purchase stocks on belief that firms will be able to pay dividends. However, some stocks (such as AMZN) pay no dividends, whatsoever. The value of the stock is purely a measure of speculated future value of the stock. However, once a firm issues a given stock and have received an infusion of capital, the stock price has limited effect on the firm's operations. Two examples</p>
<ol>
<li>If the firm should ever need to issue more stocks, higher stock prices mean fewer shares to be sold for the same, fixed infusion of capital. The creation of greater shares will deflate the value of each share.</li>
<li>Executives hold a disproportionate number of shares in the firm and have an incentive to keep shareholder speculation high.</li>
</ol>
<p>Either way, the value of a stock is a function of shareholder speculation and executives are incentivized to encourage positive sentiment among shareholders.</p>
<p>So if bets were taken on stock prices on Polymarket, the actual stock price and the Polymarket bet would influence one another. If AMZN shares are priced too high, consumers will instead place bets on Polymarket (to some degree.) The lesser demand for AMZN will translate to lower share prices (and vice versa.) But through statistical arbitrage, I anticipate that prices will find an equilibrium.</p>
<p>Aside from government regulation blocking this behavior, would AMZN (corporate financial stock) and Amazon-bet (Polymarket) converge on the same price given that a stock's price is effectively a measure of the firm's executives' ability to influence shareholder beliefs?</p>

<stock-market>
Polymarket bets on financial security performance
jbuddy_13
# Polymarket bets on financial security performance

(Asked by: username_0 on 2024-12-10)

Recently, firms such as Polymarket allow users to take bets on external events such as elections, criminal investigations, etc. Suppose that Polymarket allowed bets on external financial securities, for example AMZN, Bitcoin, etc.

Some stocks pay dividends provided that firms are able to do so. Consumers purchase stocks on belief that firms will be able to pay dividends. However, some stocks (such as AMZN) pay no dividends, whatsoever. The value of the stock is purely a measure of speculated future value of the stock. However, once a firm issues a given stock and have received an infusion of capital, the stock price has limited effect on the firm's operations. Two examples

1. If the firm should ever need to issue more stocks, higher stock prices mean fewer shares to be sold for the same, fixed infusion of capital. The creation of greater shares will deflate the value of each share.
2. Executives hold a disproportionate number of shares in the firm and have an incentive to keep shareholder speculation high.

Either way, the value of a stock is a function of shareholder speculation and executives are incentivized to encourage positive sentiment among shareholders.

So if bets were taken on stock prices on Polymarket, the actual stock price and the Polymarket bet would influence one another. If AMZN shares are priced too high, consumers will instead place bets on Polymarket (to some degree.) The lesser demand for AMZN will translate to lower share prices (and vice versa.) But through statistical arbitrage, I anticipate that prices will find an equilibrium.

Aside from government regulation blocking this behavior, would AMZN (corporate financial stock) and Amazon-bet (Polymarket) converge on the same price given that a stock's price is effectively a measure of the firm's executives' ability to influence shareholder beliefs?

**Tags:** stock-market

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## 1 answers

### Answer by username_1 on 2024-12-10. Score: 1

Stock price is reflecting some expected present value of the worth of a company, even if it isn't totally that way. Because of the presence of risk, people do not know the future value of the stock, and sorting out that risk is reflected through options pricing. People have the option to lock in certain purchases at a fixed price, but some people may sell that option away rather than complete a purchase.

The price of a stock isn't all noise or all signal. If people were allowed to bet on the price of a stock outside of the stock market, the price may not match the price of the security on the regular market. One reason may be that different agents trading for different reasons may have different momentum pricing patterns. See more about [intraday momentum pricing](https://www.sciencedirect.com/science/article/abs/pii/S0304405X18301351). This is just one angle I think of, but there's other reasons why the prices may not match.

Suggested reading:

* Gao, Lei, Yufeng Han, Sophia Zhengzi Li, and Guofu Zhou. "Market
  intraday momentum." Journal of Financial Economics 129, no. 2 (2018):
  394-414.
* Baltussen, Guido, Zhi Da, Sten Lammers, and Martin Martens. "Hedging demand and market intraday momentum." Journal of Financial Economics 142, no. 1 (2021): 377-403.


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