The Hollywood Stock Exchange (HSX) is an online prediction market where “investors” bet on the performance of various elements within the entertainment industry. The bets are made using credits called Moviestocks, Starbonds, Celebstocks, TVStocks, and various other derivatives.
Trades are executed with “Hollywood Dollars,” a virtual currency that players receive upon account setup, successful trades, and quiz participation. Each “investment” has a ticker-like symbol, for example, the symbol for the movie Iron Man 3 is IRNM3.
Key Takeaways
- The Hollywood Stock Exchange (HSX) is an entertainment “stock market” where people can trade virtual shares of celebrities and movies with Hollywood Dollars®.
- Share values fluctuate based on the success of the underlying film or celebrity in the entertainment market, experiencing highs with successful releases and lows with failures.
- Founded in 1996, the HSX was acquired by the New York City-based brokerage firm Cantor Fitzgerald in 2010 and is now headquartered in Los Angeles, California.
Understanding the Hollywood Stock Exchange (HSX)
The Hollywood Stock Exchange employs virtual specialist technology, developed by co-founders Max Keiser and Michael R. Burns. Operating since 1996, the platform was acquired by Cantor Fitzgerald, which launched a similar real-world exchange known as the Cantor Exchange in 2010.
Previous versions of the game included features like a music market for purchasing musical artists, prizes for top gainers, and a “buyout” program where top players could sell their portfolios for real money. These features have since been discontinued.
The platform attracted private investments and even ran TV ads on cable channels during the dotcom boom. Post the dotcom crash, Cantor Fitzgerald acquired the exchange, later integrating it with their UK gambling operations, enabling bettors to wager on U.S. films’ box office gross. New users get H$2,000,000 virtual Hollywood Dollars to start the game.
The Hollywood Stock Exchange and Prediction Markets
HSX operates as a prediction market in game format, where market prices indicate what the majority thinks the probability is for a particular event. Prediction market contracts expire at either 0% or 100%, functioning as a form of binary options.
Prediction markets, reflecting the concept of crowdsourcing, aim to aggregate information on specific topics. They’re known for their accuracy, covering a wide range of subjects including political elections, often including platforms like fivethirtyeight.com for analysis.
Advantages and Disadvantages of the HSX
Trading in Moviestocks and Starbonds forecasts the box office results within the first four weeks of a film’s wide release. However, the relatively small market size makes it prone to manipulation. Special “warrants” are issued around holidays and blockbuster season, offering profits if actual box office receipts exceed their face value, otherwise expiring worthless.
Pros
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Few barriers to entry
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Provides valuable market information to predict movie successes and failures well in advance of opening
Cons
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Small markets are easy to manipulate
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Prices are highly vulnerable to events like casting announcements
Example of the HSX
Imagine you believe Al Pacino’s career will soar thanks to renewed interest from the re-release of the Godfather films. You can buy (go long on) an Al Pacino StarBond. Conversely, if you think Pacino’s popularity is waning, you could sell his StarBond short to profit from a decrease in its value.
When the market moves favorably enough for you, you can sell your long position or buy back your short position, turning your extra Hollywood Dollars into profit.
The Bottom Line
The Hollywood Stock Exchange offers an engaging way to predict the success of upcoming films and celebrities’ careers. Upon joining, you receive two million Hollywood Dollars to trade freely, potentially paving your way to mogul status.
Hollywood Stock Exchange FAQs
How Do I Place a Trade on the HSX?
After opening an account, you can buy and sell films and stars in the Movie Market. Stars are traded with StarBonds while movies are traded with MovieStocks. You get two million Hollywood Dollars when your account is opened.
Are there Initial Public Offerings on the HSX?
Yes. When a star or a movie is first added to the HSX, it’s termed an initial public offering (IPO). Generally, the price of a MovieStock or StarBond IPO remains stable on the first day of trading.
Can I Lose Hollywood Dollars on a Trade?
Yes. If the value of a MovieStock or StarBond you own decreases and you sell it, you will incur a loss. The riskier scenario involves shorting a MovieStock or StarBond; a rising value will compound your losses until you liquidate the trade or let it expire.
Related Terms: prediction market, crowdsourcing, virtual currency, binary options.
