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1% ============================================================================2% UQO Working Paper Template — Economics / Finance3% ============================================================================4\documentclass[12pt,letterpaper]{article}56% --- Encoding & Language ---7\usepackage[utf8]{inputenc}8\usepackage[T1]{fontenc}9\usepackage[english]{babel}1011% --- Page Layout ---12\usepackage[13 letterpaper,14 top=1in,15 bottom=1in,16 left=1in,17 right=1in18]{geometry}1920% --- Typography ---21\usepackage{mathptmx} % Times-like font (text + math)22\usepackage{microtype} % Improved typographic refinements23\usepackage{setspace}24\onehalfspacing % 1.5 line spacing2526% --- Math ---27\usepackage{amsmath,amssymb,amsthm}2829% --- Theorem Environments ---30\newtheorem{proposition}{Proposition}31\newtheorem{definition}{Definition}32\newtheorem{hypothesis}{Hypothesis}3334% --- Tables ---35\usepackage{booktabs}36\usepackage{tabularx}37\usepackage{multirow}38\usepackage{threeparttable}39\usepackage{siunitx}40\sisetup{41 input-symbols = {()},42 table-format = -1.3,43 parse-numbers = false44}4546% --- Figures ---47\usepackage{graphicx}48\usepackage{subcaption}49\usepackage{float}5051% --- Colors & Links ---52\usepackage[dvipsnames]{xcolor}53\usepackage[54 colorlinks = true,55 linkcolor = NavyBlue,56 citecolor = NavyBlue,57 urlcolor = NavyBlue,58 breaklinks = true59]{hyperref}6061% --- Bibliography ---62\usepackage[authoryear,round,semicolon]{natbib}63\bibliographystyle{aer}6465% --- Captions ---66\usepackage[67 font = small,68 labelfont = bf,69 labelsep = period,70 justification = justified,71 singlelinecheck = false72]{caption}7374% --- Headers & Footers ---75\usepackage{fancyhdr}76\pagestyle{fancy}77\fancyhf{}78\renewcommand{\headrulewidth}{0pt}79\fancyfoot[C]{\thepage}8081% --- Section Formatting ---82\usepackage{titlesec}83\titleformat{\section}{\large\bfseries}{\thesection.}{0.5em}{}84\titleformat{\subsection}{\normalsize\bfseries}{\thesubsection.}{0.5em}{}85\titleformat{\subsubsection}{\normalsize\itshape}{\thesubsubsection.}{0.5em}{}8687% --- Appendix Support ---88\usepackage[toc,page]{appendix}8990% --- Algorithm Support ---919293% --- Misc ---94\usepackage{enumitem}95\setlist{nosep,leftmargin=*}9697% ============================================================================98% METADATA — Edit these fields for each working paper99% ============================================================================100\newcommand{\WPnumber}{8}101\newcommand{\WPtitle}{Prediction Markets as Arrow--Debreu Securities: Evidence from Polymarket}102\newcommand{\WPsubtitle}{State Prices, No-Arbitrage Bounds and Macroeconomic News in Blockchain-Based Contingent Claims}103\newcommand{\WPdate}{October 2026}104\newcommand{\WPversion}{1.1}105\newcommand{\WPabstract}{%106 Negative-risk events on Polymarket list one binary contract for every107 outcome of a decision and settle exactly one of them at one dollar, so108 that their prices are observable analogues of Arrow--Debreu state prices.109 We use the five-outcome market on the June 2026 FOMC decision (146 daily110 closes, December 2025 to May 2026) and the seventeen-contract market on111 the 2024 U.S.\ presidential election (304 daily closes) to ask how the112 Arrow--Debreu pricing restrictions fare in a blockchain market. Because113 spanning is built into the contract design, the testable content is the114 law of one price for the complete set of claims, whose executable115 no-arbitrage bounds we derive from the platform's minting and conversion116 mechanics. The sum of state prices averages 1.017 (Fed) and 1.015117 (election); the overround is statistically positive but of the order of118 the quoted half-spreads of the low-priced legs, declines steadily towards119 resolution, reverts within two days, and is bracketed by the bid- and120 ask-side sums of the order book. It has the wrong sign to be explained by121 the time value of money, which places the complete set below one. The122 normalised prices define a risk-neutral distribution over the FOMC123 decision whose mean---a Polymarket analogue of the futures-implied124 expected policy change---moves two to five times more, in variance terms,125 on FOMC and employment-report days than on other days, while weekend126 trading carries about one third of weekday variance. Once Polymarket127 closes are aligned to the U.S.\ trading calendar and lag orders are chosen128 by information criteria, daily changes in this measure neither lead nor129 lag the ten-year Treasury yield, the S\&P~500, the VIX or Bitcoin. We130 document how a one-day misalignment of blockchain time stamps and a131 minimum-$p$ lag search generated spurious lead--lag findings in an earlier132 version.%133}134\newcommand{\WPkeywords}{prediction markets, Arrow--Debreu securities, state prices, law of one price, monetary policy expectations, macroeconomic announcements, Polymarket}135\newcommand{\WPjel}{G13, G14, E52, D47, C58}136137% --- Author ---138\newcommand{\WPauthor}{Simon-Pierre Boucher}139\newcommand{\WPaffiliation}{%140 Département des sciences administratives\\141 Université du Québec en Outaouais%142}143\newcommand{\WPemail}{simon-pierre.boucher@uqo.ca}144\newcommand{\WPaddress}{%145 Gatineau -- Pavillon Alexandre-Taché\\146 283, boulevard Alexandre-Taché\\147 Gatineau, Québec, Canada J9A 1L8%148}149150% ============================================================================151% DOCUMENT152% ============================================================================153\begin{document}154155% --- Title Page ---156\input{sections/titlepage}157158% --- Main Body ---159\input{sections/introduction}160\input{sections/literature}161\input{sections/theoretical}162\input{sections/data}163\input{sections/methodology}164\input{sections/results}165\input{sections/robustness}166\input{sections/conclusion}167168% --- References ---169\newpage170\bibliography{references}171172% --- Appendix ---173\input{appendix/appendix}174175\end{document}176