Who'll win the Super Bowl? There's a market for that. The Oscars? There's a market for that. How well will Apple's iPad do? Yep, there's a market for that, too. Prediction markets, which started out as a political phenomenon, are becoming routine.

It's been more than 20 years since economists came up with the idea of using a "stock exchange" to predict the performance of political candidates, just as you predict the performance of a company by buying its stock. Such markets aren't perfect, as the economic downturn of 2008 illustrated all too well. But in the political realm, some economists say prediction markets reflect the actual results of an election better than traditional opinion polls. (Others disagree.)

The concept can be applied to a wide variety of propositions - ranging from the political prospects for health care reform to the spread of swine flu. (By the way, the market trends suggest that the H1N1 flu will make a comeback, even though health officials have a different view.) Small-scale markets can also be used for industry forecasts - so much so that Microsoft, Google and Yahoo would like to see them used more widely.

Bet on the Colts ... or the Saints?
The Super Bowl is an ideal subject for prediction markets ... or should we say, "betting." A couple of years ago, Wharton School economist Justin Wolfers told me that the betting line in Las Vegas is the "single best indicator" of the big game's outcome.

By the time the playoffs come around, a lot of the uncertainty has been wrung out of the proposition. So it's no surprise that the Indianapolis Colts' all-or-nothing shares are valued higher than the New Orleans Saints' shares (64.6 vs. 35.4 percent) on the Inkling market. The Colts are favored in most betting lines, with a 4.5-point spread emerging as a consensus.

One investment strategist has advised betting on the Saints to beat the spread, however, because the Colts' "alpha" is perceived to be higher than it actually is. Whatever that means.

Unlike honest-to-goodness online gambling sites, most prediction markets based in the United States don't deal with real money due to legal restrictions. Instead, they trade in "karma" or play money. If you're on the right side of a proposition, you win a pre-set payoff. If you're on the wrong side, you lose your investment.

Prediction markets allow you to buy and sell your shares as the price changes, so you can dump your investment in the Colts and reinvest in the Saints if the market conditions change - for example, if Colts lineman Dwight Freeney has a bad ankle. Also, knowledgeable investors can capitalize on the bad choices made by those who are less knowledgeable (sometimes known as "morons vs. non-morons," or "sheep vs. wolves").

With all this in mind, here are how a couple of other propositions are shaping up:

Oscar's closest races
The Hollywood Stock Exchange got nine out of 10 best-picture nominees right this week. The market's only miss was having "Invictus" up for an Oscar rather than "The Blind Side." Now the market is trading shares for the winners - and "Avatar" is facing a strong challenge from "The Hurt Locker." The directors of those two movies (James Cameron and Kathryn Bigelow) are also neck-and-neck in the market's Oscar assessment.

Other favorites include Jeff Bridges for best actor, Sandra Bullock for best actress, Christoph Waltz for best supporting actor and Mo'Nique for best supporting actress. Inkling's Oscar markets predict the exact same outcomes, suggesting that the "Avatar"/"Hurt Locker" matchup will be the biggest source of suspense for the March 7 Oscar ceremony.  

Is the iPad a good iBet?
In the wake of Apple's unveiling of its iPad electronic tablet, the publicity folks for Bookmaker.com sent out a release sizing up the odds for the year's best-selling tablet. The iPad was listed as the favorite, just as you'd expect. Here's the full lineup, where higher numbers indicate a smaller likelihood of winning and thus a larger payoff:

• Apple's iPad: +200
• Barnes & Noble's Nook: +275
• Amazon's Kindle: +300
• Microsoft/HP Slate: +350
• Dell's Mini 5: +400
• Sony Reader: +400
• Irex Iliad: +500
• Fujitsu Flepia: +550

Do you think the markets are a magic oracle for predicting real-life outcomes, or do they merely mirror conventional wisdom? Feel free to weigh in with your opinion - and pass along your own Super Bowl / Oscar / iPad predictions while you're at it.

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