How to oversell InTrade’s predictive power

Chad Rigetti (InTrade VP) is interviewed by the website “MoneyFoxs.com”.

In the seven days leading up [Joe Biden's] share price on Intrade went up about three and a half times. In the seven days leading up his share price on Intrade went up about three and a half times. In a field of about four or five different viable candidates he became the clear leader on Intrade more than about 48-72 hours before he was named, even before anyone was floating his name as a serious candidate.

Chad Rigetti suggests that there was insider trading at work, which informed the InTrade prediction market on Joe Biden —well before the leak and/or announcement.

I have a different reading. The reality is that the Barack Obama campaign had been leaking the fact that they needed a VP experienced in foreign affairs (so as to counter-balance Barack Obama’s inexperience in this crucial area –that was before the financial crisis), and it happened that in the short list of potential VPs, Joe Biden was the only one who was fitting this narrative. It was thus easy for journalists (and for the InTrade traders) to anticipate that Barack Obama would choose Joe Biden.

This is typical of the overselling done by the InTrade pushers —they suppress the existence of the primary indicators (which event derivative traders rely on to get informed), and they tell gullible reporters that InTrade has magical power. It’s total bullshit. The life of the InTrade prediction market on “Joe Biden as the VP nominee” represented the simple reflection of what event derivative traders could read in the Press. There was no magic whatsoever.