Market PsychologyOriginal Framework

Category Efficiency

Market efficiency varies by how emotionally engaged participants are. Emotional categories enable wealth extraction.

EC
Ethan Cho
Chief Investment Officer, TheVentures

What is Category Efficiency?

Prediction market data by category: - Finance: 0.17pp gap (nearly efficient) - Politics: 1.02pp gap - Sports: 2.23pp gap - Crypto: 2.69pp gap - Entertainment: 4.79pp gap (28x worse than finance) Pattern: Emotional categories = maximum Optimism Tax.

Practical Application

For VCs: Avoid emotional categories unless you're the maker. Emotional (avoid): Consumer social, entertainment apps, celebrity-endorsed anything, sectors retail loves Rational (seek): B2B infrastructure, fintech pipes, supply chain automation, unsexy categories with pricing power If retail investors are excited, you're probably the taker.

Data Source

Prediction market analysis across 7+ categories

Read the Full Analysis→

How to Cite

APA: Cho, E. (2026). Category Efficiency. VentureOracle. https://ventureoracle.kr/concepts/category-efficiency

MLA: Cho, Ethan. “Category Efficiency.” VentureOracle, 2026, ventureoracle.kr/concepts/category-efficiency.

TOPICS

category efficiencymarket efficiencyemotional marketsrational investingprediction marketsventure capitalEthan ChoTheVentures

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