–
…- dixit James Surowiecki (commenting on Felix Salmon’-s post):
Interesting. The Hollywood Stock Exchange, not surprisingly, did better [than InTrade]. Cotillard was, as at Intrade, a comfortable second favorite. But so too was Swinton —- in fact, she was even more of a second favorite, as her price was very close to Blanchett’-s when the market closed. In fact, if you look at her chart:
http://movies.hsx.com/servlet/SecurityDetail?symbol=A8TSWit’-s hard not to conclude that the market was really incorporating new information in the week leading up to the ceremony.
I didn’-t follow the Hollywood Stock Exchange [*] (or even BetFair) closely for the Oscars 2008, but here are InTrade’-s expired event derivatives (event futures):
–
[*] UPDATE: HSX claims a 75% success rate.
–
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.
–
I’d like to point out once again that we should be very careful when talking about accuracy of probabilistic forecasts. To repeat what I’ve mentioned before in this post, if the favourite wins every time, the market accuracy is in fact quite poor.
Jed Christiansen » Thanks, Jed. You’re right. I will add an explainer in the text.
I’d like to point out once again that we should be very careful when talking about accuracy of probabilistic forecasts. To repeat what I’ve mentioned before in this post, if the favourite wins every time, the market accuracy is in fact quite poor.
Jed Christiansen » Thanks, Jed. You’re right. I will add an explainer in the text.