Seriously, why aren’t more people talking more about this?

Posted on June 13, 2007 by Chris F. Masse

Asks the InTrade trader Alex Forshaw about the probable (not a sure thing, though) manipulation of the Hillary Clinton prediction market.

Previous: There’s a deep-pocket Clinton pal who is pushing her event derivative way up. + Who could have masterminded the alleged manipulation of the Hillary Clinton prediction market??? + The Hillary Clinton manipulation stories

About Chris F. Masse

Founder and President of Midas Oracle
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9 Responses to Seriously, why aren’t more people talking more about this?

  1. Niall O'Connor says:
    June 13, 2007 at 11:48 AM

    Firstly, because there is no hard evidence to substantiate the story.

    Secondly, because even if there was, the relationship between such manipualtion and real world beliefs and actions is generally unproven……….

  2. Alex Forshaw says:
    June 13, 2007 at 10:36 PM

    Niall: Follow CFM’s link, look at the graph, then go back and look at Prof. Zitzewitz’s writeup, and tell me there isn’t some pretty manipulative s**t going on.

  3. Niall O'Connor says:
    June 14, 2007 at 3:02 AM

    I still cannot see the proof that there is manipulation going on. The trend would seem to be in line with activity in the broader betting market, where Clinton is a strong favourite, and being supported accordingly;

    “Hilary Clinton is the 11/8 favourite with bookmakers William Hill to become the next President of the USA with John Edwards priced as the 7/2 second favourite. Hills also offer 6/1 for John McCaine, 12/1 John Kerry who was the subject of a £2000 bet at odds of 20/1 three weeks ago and 40/1 fro Arnold Schwarzenegger. “Our ‘Next President’ betting has been open for two years and we already have £100,000 wagered on the result, the majority of which is for Hilary Clinton to become the first female President,” said Hill’s spokesman Rupert Adams.”

  4. Alex Forshaw says:
    June 14, 2007 at 10:31 AM

    I just went to William Hill. Their current odds are miles away from those numbers. I think you’re looking at some pretty dated stuff.

    Hilary Clinton 2.10 (1.1-1)
    Barack Obama 5.00 (4-1)
    Rudolph Giuliani 5.00 (4-1)
    Fred Thompson 13.00 (12-1)
    Mitt Romney 13.00 (12-1)
    Al Gore 13.00 (12-1)
    John Mc Cain 13.00 (12-1)
    John Edwards 15.00 (14-1)

    Hillary’s still astronomically priced, though. Do they take US customers??

  5. Chris. F. Masse says:
    June 14, 2007 at 10:50 AM

    Clinton
    1 / 2.10 * 100 = 47.6%
    You have to deduce 20 points for their commercial margin –> objective probability of Clinton is around 30%.

    Do you guys agree with my computation or am I way off?? Niall is the expert.

    —

    Via Niall O’Connor, comparison of bookmaker odds on US politics:
    http://www.oddschecker.com/specials/politics-and-election/us-presidential-election-2008/to-be-elected-president

  6. Alex Forshaw says:
    June 14, 2007 at 2:10 PM

    There’s no way they are taking that much off the top for their commercial margin; or am I completely misreading you?

    Somebody is really blowing it with those odds. Sum of GOP numbers

    Rudy – 20%
    FT – 7.7%
    Mitt – 7.7%
    McCain – 7.7%

    total – 43%

    Democrats

    HRC – 47.6%
    BHO – 20%
    Gore – 7.7%
    Edwards – 6.6%

    total – 82%

    Dems Republicans = 125%.

    They are taking 25% off the top. You’d have to be an idiot to trade there.

    I think for the actual probabilities, shave a quarter off each one? So Rudy 16, Fred/Romney/McCain 6 each. Hillary 35, Obama 16, Gore 6, Edwards 5.

    That commercial margin is insane.

  7. Chris. F. Masse says:
    June 14, 2007 at 2:37 PM

    They think Hillary Clinton’s probability is 30%, so they sell it to you at 50% to have a 20-point margin. Ask Robin Hanson, Justin Wolfers or Niall O’Connor to see whether I’m in the right.

  8. Alex Forshaw says:
    June 14, 2007 at 3:11 PM

    25 point margin actually.

    I didn’t mean you were wrong; I just think you have to be exceptionally stupid to take those odds, in light of what you can get on Intrade, Betfair, etc.

  9. Chris. F. Masse says:
    June 14, 2007 at 4:53 PM

    Thanks to both of you for your comments.

    If the normal margin is 15%, then the bookie thinks that the Clinton outcome is worth 30-35%, right?

    JCK, you know more than me, but just a remark. You said, “A bookie will aim for a balanced book”. That’s what they say, but Steve Levitt had a paper where he discovered that’s not the case. They sell bets at higher prices to strong believers —for instance, if you belong to the city of the team that goes in the finale.

    So to give an example, they will sell at a higher price the bet that says the Spurs will win to the inhabitants of San Antonio, because they have a bias and the bookie takes advantage of it.

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