Gore is about to miss the registration deadline for the Michigan primary which is on Oct. 23 and he’ll also miss the Nov. 2 registration deadline for the New Hampshire primary soon too. So there’s actually more chance of him becoming president as an Independent than as the Democratic nominee.

One of my Deep Throats tells me that, if there is one contract to short-sell, it’s that one (Al Gore winning the Democratic nomination). 5.2% this early morning.

Subject: Conditional chance formula

Message: 1. With regard to the blog entry “Is there manipulation in the Hillary Clinton Intrade market?“, what is the reason/value of distinguishing between Hillary’s chance of becoming president from her “conditional chancel” to become president? Isn’t her chance to become president simply the price of the “Hillary president contract”? Why multiply that by the “Hillary nomination” contract?

2. I have yet to fund prediction market account. Do you know where I can find an explanation of the legal risks assumed by a US citizen (NY state) who trades in these markets? Would you trust InTrade with $5,000?

Right now the pundit with perhaps the most outstanding record thinks Hillary Rodham Clinton has the best chance of becoming president, with Bill Richardson enjoying the best shot of becoming vice president. That pundit is not a human but rather Intrade, a political betting Web site (www.intrade.com) that has regularly proven more accurate than polls and political experts alike. In the last presidential election, it called the winner accurately in each of the 50 states. That’s a tribute to what is called “the wisdom of crowds,” the notion that the collective judgment of many people is typically more accurate than the judgment of even a very well-informed individual. If you collect a bunch of guesses about, say, the weight of an ox, the average estimate will be eerily accurate. For the record, Intrade’s bets at this very early stage give Mrs. Clinton a 27 percent chance of becoming president, followed by Barack Obama and Rudy Guiliani, each at about 20 percent; Fred Thompson, 15 percent; and Mitt Romney, 8 percent. [...]

U.K.-based BetFair has the same predictive power than Ireland-based InTrade but the British prediction exchange (betting exchange) never gets cited in the U.S. media. Totally unfair.

The economists Justin Wolfers and Eric Zitzewitz have pointed out that Hillary Clinton’s chances of becoming president, as predicted by one betting market, InTrade, started to climb dramatically mid-May, topping 40 per cent after months of fluctuating between 20 and 30 per cent. Her odds of winning the Democratic nomination stayed around 50 per cent, implying that if nominated, her chance of then winning the presidency would be about 80 per cent. You can’t get much more electable than that. So is someone in Hillary’s camp trying to boost her chances by manipulating the market into a self-fulfilling prophecy? Or is it a rival candidate trying to make her look like a manipulator? [...] But it’s hard to manipulate markets for long. [...]

Robin Hanson and Ryan Oprea, economists at George Mason University, argue that manipulators can actually increase the accuracy of prediction in markets: by making big, unprofitable bets they are effectively subsidising the market and paying other traders to pay attention. [...]

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BetFair – Hillary Clinton as the Democratic Presidential Nominee -

BetFair – Winning Party: Democratic -

BetFair – 2008 Election – Female President -

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NewsFutures – Hillary Clinton will be the Democratic Presidential Nominee in 2008.

© NewsFutures

NewsFutures – A Democrat will be elected President in 2008.

© NewsFutures

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Previous: Intrade: Obama and Clinton at near-parity – by Alex Forshaw + 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??? + Manipulation can affect prices. – by Eric Zitzewitz + Is there manipulation in the Hillary Clinton Intrade market? – by Koleman Strumpf + Is there manipulation in the Hillary Clinton Intrade market? Redux. – by Justin Wolfers + Hillary Rodham Clinton – Event Derivatives & Prediction Markets – InTrade-TradeSports + BetFair + NewsFutures = the market-generated probabilities across the different real-money and play-money prediction exchanges + Win Justin’s Money? (re: Is there manipulation in the Hillary Clinton Intrade market? Redux.) – by Koleman Strumpf

The economists Justin Wolfers and Eric Zitzewitz have pointed out that Hillary Clinton’s chances of becoming president, as predicted by one betting market, InTrade, started to climb dramatically mid-May, topping 40 per cent after months of fluctuating between 20 and 30 per cent. Her odds of winning the Democratic nomination stayed around 50 per cent, implying that if nominated, her chance of then winning the presidency would be about 80 per cent. You can’t get much more electable than that. So is someone in Hillary’s camp trying to boost her chances by manipulating the market into a self-fulfilling prophecy? Or is it a rival candidate trying to make her look like a manipulator? [...] But it’s hard to manipulate markets for long. [...]

Robin Hanson and Ryan Oprea, economists at George Mason University, argue that manipulators can actually increase the accuracy of prediction in markets: by making big, unprofitable bets they are effectively subsidising the market and paying other traders to pay attention. [...]

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??? + Manipulation can affect prices. – by Eric Zitzewitz + Is there manipulation in the Hillary Clinton Intrade market? – by Koleman Strumpf + Is there manipulation in the Hillary Clinton Intrade market? Redux. – by Justin Wolfers + Hillary Rodham Clinton – Event Derivatives & Prediction Markets – InTrade-TradeSports + BetFair + NewsFutures = the market-generated probabilities across the different real-money and play-money prediction exchanges + Win Justin’s Money? (re: Is there manipulation in the Hillary Clinton Intrade market? Redux.) – by Koleman Strumpf

<For math geeks: leaving aside the unlikely event that she switches parties, this figure can be calculated from the nomination and overall winner markets using the rules of conditional probability,
Pr(Clinton president | Clinton nomination)
= Pr(Clinton President)/Pr(Clinton Nomination)>

This does seem anomalous and perhaps indicates that some individual or group is trying to make Hillary look like a strong candidate. But this possibility might be a bit less likely if it was simultaneously occurring in the other political prediction markets out there. In fact this is exactly what is going on: the Intrade prices are consistent with Betfair and other exchanges, and Clinton’s conditional election probability is substantially higher at bookmaker sites like Ladbrokes.

The attached file [XLS file] contains the details but here are the current conditional probabilities [see also the charts at the bottom]:

Intrade 65.88
Betfair 76.81
Bet365 65.45
expekt.com 60.00
BlueSq 66.67
Paddypower 68.44
Ladbrokes 84.89 (44% chance to win; 52% chance to get nomination)

What is more, the figures in the attachment show that there was price spike in the Hillary for president Betfair market at roughly same time as the one at Intrade (in mid-May).

So what to make of all this? While it is possible that there has been some sort of concerted effort to distort Hillary’s price, this would have required a simultaneous attack on virtually all of the big markets. Moreover, it is difficult to use this story to explain the odds posted at bookmakers like Ladbrokes unless they are setting prices to unwind some substantial Hillary position.

An alternative explanation is that there was in fact some change in market sentiment in the last few weeks. For example, the states of the world which would lead to a Hillary nomination are those in which she is more likely to beat the Republican nominee. For me at least, it usually takes several weeks after a sustained price change to understand how and why they occurred. Perhaps time will also reveal whether this was a case of crowd wisdom or market manipulation.

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P.S.: In case you are interested, I have written a paper with Paul Rhode entitled “Manipulating Political Stock Markets: A Field Experiment and a Century of Observational Data” (link: http://www.unc.edu/~cigar/papers/ManipHIT_Jan2007.pdf )

As the title suggests, this paper examines manipulation in prediction markets using both observational evidence and a field experiment.

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Static Charts [for the dynamic charts click here, or click on the charts]: