Comments on: Yet another guy, writing about prediction markets in the mainstream media, who does not master what he is talking about.

By: Medemi

Medemi — Thu, 22 May 2008 21:42:01 +0000

You know, I have to smile when I read some of these articles. Pseudo-scientists looking for evidence to support their prejudiced beliefs.
That’s why we need high liquidity money-to-be-made prediction markets. To teach them a lesson !

By: Chris F. Masse

Chris F. Masse — Thu, 22 May 2008 20:14:07 +0000

@Medemi: I didn’t say that the prediction markets are not robust. i said that the accuracy of the political prediction markets is close to the accuracy of the polls.
http://www.stat.columbia.edu/~.....cal_m.html

By: Medemi

Medemi — Thu, 22 May 2008 18:21:17 +0000

Chris,
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I’ve analysed an extensive set of data, consisting of every soccer match played in europe from 2002 and onwards.
One thing you will learn is that markets become more efficient (more accurate) over time.
This can only happen when there’s a lot of money to be made. It acts as an incentive which, over time, will translate into more accurate markets.
It’s not like the odds compilers at the bookies became smarter during this period. It’s something else.
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For you to say that the superiority of prediction markets is a long-term statistical one, is a bit disappointing.
It will be a fundamental one, given the right circumstances. Which we simply don’t have in the US today.
To what degree, is dependent on a number of factors (like type of market / market characteristics) but the general principle will always hold true.
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You stick to your facts, and I will stick to my wisdom.

By: Chris F. Masse

Chris F. Masse — Thu, 22 May 2008 08:31:28 +0000

@Medemi: It beats some experts, but I would bet BetFair and an average of 1,000 experts would agree on the same price/probability.

By: Chris F. Masse

Chris F. Masse — Thu, 22 May 2008 08:30:28 +0000

@Ed Murray: Agree with your first part, at least.

By: Chris F. Masse

Chris F. Masse — Thu, 22 May 2008 08:29:20 +0000

@Medemi: The superiority of prediction markets over polls is a small, long-term, statistical thing,.
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Practically, the traders feed on polls and experts.

By: Medemi

Medemi — Wed, 21 May 2008 22:52:11 +0000

Yes, now I know why I “had to choose”.
Markets will be loose at first, and become stronger with time.
It must have been the bookies who determined the price on betfair at first, now it’s the other way around. It takes time to beat the “experts”.

By: Ed Murray

Ed Murray — Wed, 21 May 2008 22:36:09 +0000

I think there is an extra dimension of “time” with prediction markets. Shrewd money tends to become stronger, so if someone is shrewd and is able to accumulate wealth through accurate predictions, money is transferred towards those who have skill, or other (savoury or unsavoury) edges.
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Initial prediction markets in an area may be quite ‘loose’, but over time will become stronger.
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I love the bit about “how can prediction markets get ahead of conventional wisdom” . That is genius . Financial motives are probably the closest to paramount for the vast majority of people (in most cases a good thing), and prediction markets give people the chance to literally put their money where their mouth is, at the very cutting edge of taking on conventional wisdom :-).

By: Medemi

Medemi — Wed, 21 May 2008 22:24:15 +0000

I’m with Barry on this one, if I had to choose.
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All we need is the opportunity for people to make money. Where there’s money to be made, there will be expertise. The polls under these circumstances, no matter how accurate, will just be one source of information. There will be people with superior knowledge (for instance those who understand about the flaws of certain polls).
This is nothing new… we have been talking about the superiority of prediction markets in comparison with polls, after all.

By: If you want to increase the absolute accuracy of the outputs of the prediction markets, try (if you can) to increase the quality of the inputs. | Midas Oracle .ORG

Wed, 21 May 2008 09:03:21 +0000

[...] I have been telling that to Barry Ritholtz —but he stays on his position. [...]