The definition of prediction markets as seen thru the eyes of an external, independent, impartial and unbiased observer.

3 Responses to The definition of prediction markets as seen thru the eyes of an external, independent, impartial and unbiased observer.

1. Niall O'Connor says:

   October 26, 2007 at 3:57 AM

   Independent and Confused.

   From what I have seen to date, the prediction markets lobby merely represents an attempt by a coterie of interest groups to throw of what they see as being the stigma that is associated with the term betting markets.

   However, I seem to remember a paper by Wolfers and Leigh on the 2001 Australian Federal Election demonstrating how the odds provided by the traditionalist fixed odds bookmaking company Centrebet, not only forecast the outcome of the election, but also provided very close estimates across a wide range of electorates.

   Then there was the research carried out by Leighton Vaughan Williams into the US Presidential election – Bush vs Kerry – which for some reason is not given much coverage.

   Regarding the probabilities of victory for Bush, he found the following;

   Iowa – 57.9
   Traditional Bookmakers – 62.5
   Betfair – 61.7
   Tradesports – 61.0
   Play money exchanges – 53.5
   Spread Betting companies – 62.0

   The prevalence of Tradesports in the literature, when everybody knows that Betfair presents a more high volume, efficient set of markets is also baffling to the independent observer.

   Then one comes across the following quote from John Delaney (formerly of ??) of Tradesports in the Prediction Market Industry Association (PMIA) forum;

   “Bob (Robert Hanson) and Justin (Wolfers) won’t be retiring on their earnings from PM scholarship, papers and appearances very soon.”

   Regardless of questions of their retirement what earnings are these and should they be declared??

   Further, one reads on the PMIA’s website that its board is comprised of:

   Emile Servan-Schreiber (NewsFutures) – Chairman

   Jed Christiansen (Mercury Research & Consulting) – Treasurer

   John Delaney (Intrade ?)

   Robin Hanson (George Mason University)

   Justin Wolfers (Wharton School – University of Pennsylvania)

   I think it is fair to say that the matter of what constitutes a prediction market has yet to be resolved; not least, when it is clear that traditional betting markets can be and are just as predictive as these so called “prediction markets.” (And for the pedants out there – yes, even in the case of traditional horse race pari-mutuel betting markets, where research has shown that in the Hong Kong and New Zealand betting markets, there is no favourite-longshot bias).

   Sadly, the impression that one is left with, is that those seeking to promote the prediction market industry, are guilty of cherry picking, in order to suit their own vested interests.

   The fact that markets aggregate data and can be predictive is nothing new. Seeking to ringfence a subset of said markets and attaching a new industry definition to them is a perilous exercise to say the least.

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2. Chris. F. Masse says:

   October 26, 2007 at 5:44 AM

   “Personally, I view betting markets, prediction markets, and futures markets as different names for the same phenomenon.”

   I’m happy that Jed Christiansen holds this view, which makes sense in my (also personal) view.

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3. Caveat Bettor says:

   October 26, 2007 at 1:48 PM

   I’m not sure that predictions have a similar demanders and suppliers as do bets or futures. Most of my friends at Tradesports pretty much stick to sports betting, and some tend to enjoy horse betting and poker, too (whereas I find horses and cards a waste of time).

   Although the similar demand for a time machine does bind all of the various parties together.

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