2008 US Presidential and Congressional Elections Prediction: The Sarah Palin effect has partially evaporated, but its remains point to a close race, come Tuesday, November 4, 2008.

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#1. Explainer On Prediction Markets

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Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.

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More Info:

- The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

- Prediction Market Science

- The Midas Oracle Explainers On Prediction Markets

- All The Midas Oracle Explainers On Prediction Markets

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#2. Objective Probabilistic Predictions = Charts Of Prediction Markets

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Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

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2008 US Elections

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InTrade

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2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade = electoralmarkets.com

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- This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

ProTrade vs. Sports Derivative Exchange

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I asked Chris Hibbert whether they are “-exchanges”-.

Chris Hibbert:

It looks like it from a cursory glance. In both cases, you can buy and sell, and the prices appear to be set by market interactions rather than institutional fiat. They both have a feedback mechanism based on “dividends” produced by on-field performance. ProTrade has a sophisticated formula that takes into account the players’ contribution to a winning season. SDX seems to base their dividends purely on wins and losses. The latter is easier to understand, and probably closer to the way most fans think about things. I think ProTrade is justified in believing they are closer to capturing the individual athlete’s contribution.

There’s also the difference in betting on players or teams. I think both might be helped by offering bets based on both players and teams. But until they cover hockey, I won’t spend a lot of time there. I don’t want to have to start following one of the major sports in order to bet in these play money markets.

ProTrade has a market maker, and SDX uses book orders.

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External Links:

- ProTrade

- Sports Derivative Exchange

- Zocalo (the open-source software for enterprise prediction markets, coded by Chris Hibbert)

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UPDATE: The SDX co-founder has a comment.

With regard to the 2008 US elections, both Justin Wolfers and Robin Hanson implied that BetFair is not as predictive as it should be.

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Previously: About Justin Wolfers’-s column

Justin Wolfers’- Freakonomics post (which suggests that BetFair would have a better predictive power if US traders could use it).

WE ARE BETFAIR. RESISTANCE IS FUTILE. YOU WILL BE ASSIMILATED.

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A list of the Betfair forum threads about the new premium charges.

A FaceBook group has been created to protest the new BetFair premium charges.

PREVIOUSLY: BetFair impose new “-Premium Charges”-…- Do BetFair gag the critics, too?

BetFair co-founder Andrew “Bert” Black’s blog is flooded (New Orleans-style) with comments from event derivative traders who question the rationality, logic, extent, fairness, true pupose and timing of the new “premium charges”.

PREVIOUSLY: BetFair impose new “Premium Charges”… Do BetFair gag the critics, too?

UPDATE: They announce a Q&A.

Questions to InTrade CEO John Delaney about InTrade .NET and InTrade .COM

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- InTrade .NET is a play-money prediction exchange while InTrade .COM is a real-money prediction exchange. Is there an automated market maker linking the InTrade .NET prices (or bids) with the InTrade .COM prices?

- Why is it that you ask the consumers of InTrade .NET to sign the terms of use of InTrade .COM, which mentions that: “-2.2.4 You may lose money on Exchange trades.”-? – [Thanks to Deep Throat for that remark.]

- InTrade .NET has a very good charting system. Will the same charting system be implemented at InTrade .COM whose charts are absolutely awful? (See this comparison between the InTrade .COM charts and the InTrade .COM v2 charts.) I insist to say that this should be a priority.

- Will InTrade .NET have chart widgets, just like InTrade .COM and InTrade .COM v2 both have?

- Will InTrade .NET have closed contracts (which are very useful in the accuracy discussions), just like InTrade .COM and InTrade .COM v2 both have?

- Finally, it is stated on the InTrade .COM frontpage (in a text promoting InTrade .NET) that:

When Intrade.net goes out of beta it will become the new default but the current version of Intrade.com will be retained indefinitely.

How should we understand that? Does this mean that you are going to merge your play-money and real-money prediction exchanges? (Might not be a bad idea provided that full information is given on each prediction market.)

UPDATE: Deep Throat tells me that their techies are testing their new user interface on InTrade .NET, which deals with with play money, and then if everything works out well, they may implement the same user interface on InTrade .COM, which deals with real money —-while maintaining the legacy InTrade .COM on a dedicated server, for the nostalgic users.

InTrade-TradeSports has a web server misconfiguration problem, and CEO John Delaney has a character problem.

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As I wrote at the time, the InTrade-TradeSports websites were unavailable, last Friday, August 29, 2008, during a good part of the morning.

InTrade-TradeSports is not only an event derivative exchange, but also a webspot that non-trading people often consult to get the latest market-generated probabilistic predictions. Last Friday, in addition to the traders, many people visited InTrade just to see what their prediction markets were saying about who would be John McCain’-s pick as Republican vice presidential nominee. InTrade-TradeSports CEO John Delaney has said that that Friday saw 10 times more web visitors than any usual peak day, and that their server bandwidth was not large enough to cop with all solicitations. It is well known in the media business that servers should be configured many times bigger than for the normal usage —-so as to accommodate exceptional peak times, when some impacting news break. My sentiment is that the InTrade-TradeSports technical team has probably not fully anticipated the growth of the InTrade-TradeSports followers.

As the result of this black Friday, some traders complained. One trader (Todd) started a thread on the InTrade e-mailing list. Unfortunately, Todd spiced his message with sarcasm. Which immediately irked John Delaney, who responded to the complaint, but also added a twisted line in effect inviting Todd to close his InTrade account.

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That remark offended another InTrade-TradeSports trader (Lucy Vega), who talked back to John Delaney:

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BetFair and InTrade-TradeSports are de facto monopolies (with 95% of the total business on their geographical zone, according to my estimation), and their direct competitors have far less liquidity, thus making them uninteresting for the big traders like Todd.

If John Delaney were really sincere in his wish to see the US public prediction market industry becoming legalized and experiencing a big growth in the coming decade, he should refrain from making offending remarks to his customers —-even when those clients started the feud with some sarcasm of their own. This kind of bullying behavior could attract the attention of the US regulators in a negative way, which is exactly the reverse of what is needed at this time.

I can understand that John Delaney is sometimes upset by some of his ultra-demanding and sarcastic customers. However, as I said, the real-money prediction exchanges are in a situation of being de facto monopolies, where their market-generated information is of high social utility, which creates a social responsibility for the executives and managers of these prediction exchanges. You don’-t insult and castigate a blogger who exposes a scandal. You don’-t censor the CNBC reports. You don’-t ask a complaining customer to close his / her account. All those things are big no-nos.

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UPDATE

I am re-publishing an old post of mine, as an appendix, to respond to some comments:

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Dan Laffan of InTrade has just given me permission to republish his e-mail(s) to Todd Griepenburg:

Todd,

We will absolutely not continue to be part of or facilitate any further diatribe with you on these issues.

If you are not satisfied that we
1. Have listened to your comments
2. Have replied to same and
3. Will take or have taken whatever corrective action is within our power and/or appropriate
then we reluctantly suggest that you consider closing your account on the exchange (or cease using it until our service meets your expectations). We say “reluctantly” as we do not wish to see any member leave, but we seem to be causing you immense dissatisfaction which is not our intention.

We will promptly close your account and return any funds you have in your account at your request. We await your decision and instruction.

Best regards,
Dan

Previous: A Big Trader’s Open Letter to TradeSports-InTrade + Second E-mail to InTrade-TradeSports + Third E-mail to InTrade-TradeSports + InTrade-TradeSports to Todd Griepenburg: GO TO HELL.

Dan Laffan to Todd: #1 – #2

InTrade to Todd

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UPDATE #2

For the full information of my readers, InTrade-TradeSports’-s behavior is not the worst behavior that a prediction exchange can have towards an annoying customer. I am aware of another real-money prediction exchange who does close the accounts of the customers whom they view as problematic (and that, without citing any reason) —-as opposed to just asking somebody to leave.

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UPDATE #3:

Todd’-s new message to John Delaney