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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 ---91\usepackage[ruled,vlined,linesnumbered]{algorithm2e}9293% --- 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}{Price Discovery, Market Completeness, and Information Aggregation in Blockchain-Based State-Contingent Claims}103\newcommand{\WPdate}{May 2026}104\newcommand{\WPversion}{1.0}105\newcommand{\WPabstract}{%106 This paper investigates whether blockchain-based prediction markets107 satisfy the theoretical properties of Arrow--Debreu complete markets.108 We model Polymarket binary outcome contracts as state-contingent109 claims and test for market completeness, no-arbitrage pricing,110 and information aggregation efficiency using Federal Reserve rate111 decision markets (five mutually exclusive outcomes forming a complete112 state space) and the 2024 U.S.\ Presidential Election market.113 Employing a comprehensive empirical framework---including event114 studies around FOMC and CPI announcements, Hasbrouck information115 shares, vector autoregression, Granger causality tests, and116 HAR-RV volatility models---we document three principal findings.117 First, state prices within Polymarket neg-risk groups sum118 to values close to unity, consistent with Arrow--Debreu completeness119 and the absence of persistent arbitrage. Second, prediction market120 prices adjust to macroeconomic news releases 15--45 minutes ahead of121 corresponding moves in Treasury futures, implying a price discovery122 advantage in the state-contingent claims market. Third, liquidity123 and microstructure quality, as measured by Roll spreads and Amihud124 illiquidity ratios, rival those of established financial markets for125 high-profile contracts. These results establish that decentralized126 prediction markets can function as effective Arrow--Debreu economies127 and contribute to the literatures on state-contingent pricing,128 information aggregation, market microstructure, and blockchain finance.%129}130\newcommand{\WPkeywords}{Prediction markets, Arrow--Debreu securities, state-contingent claims, price discovery, market microstructure, blockchain finance, information aggregation}131\newcommand{\WPjel}{G13, G14, D47, D53, C58}132133% --- Author ---134\newcommand{\WPauthor}{Simon-Pierre Boucher}135\newcommand{\WPaffiliation}{%136 Département des sciences administratives\\137 Université du Québec en Outaouais%138}139\newcommand{\WPemail}{simon-pierre.boucher@uqo.ca}140\newcommand{\WPaddress}{%141 Gatineau -- Pavillon Alexandre-Taché\\142 283, boulevard Alexandre-Taché\\143 Gatineau, Québec, Canada J9A 1L8%144}145146% ============================================================================147% DOCUMENT148% ============================================================================149\begin{document}150151% --- Title Page ---152\input{sections/titlepage}153154% --- Main Body ---155\input{sections/introduction}156\input{sections/literature}157\input{sections/theoretical}158\input{sections/data}159\input{sections/methodology}160\input{sections/results}161\input{sections/robustness}162\input{sections/conclusion}163164% --- References ---165\newpage166\bibliography{references}167168% --- Appendix ---169\input{appendix/appendix}170171\end{document}172