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Link via Jason Ruspini
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Previously: The InTrade predicton markets on the viability of InTrade won’-t reveal *ANYTHING* about the future of InTrade.
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My post about the sudden closure of TradeSports was the #2 most downloaded webpages, yesterday —-even though that post was published late yesterday. And this morning, I am receiving tons of e-mails from the InTrade and TradeSports traders (they are often the same people).
My reasoning:
TAKEAWAY:
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Chris F. Masse
It is impossible for any InTrade trader to know whether the financial accounting of InTrade is sound or not. Any commercial company surrounds itself with secrecy. Let alone an Irish company that illegally (from the DOJ’-s standpoint) exports its services to Americans.
UPDATE: See the comment #1 there.
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It was impossible for the InTrade traders to divine whether Yahoo! CEO Jerry Yang would step down.
(In passing, note that InTrade has expired this contract hours after the breaking news hit the wires.)
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It was impossible for the InTrade traders to divine whether Unlawful Internet Gambling Enforcement Act of 2006 would be voted and enacted.
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The InTrade predicton markets on the viability of InTrade won’-t reveal ANYTHING about the future of InTrade. It will just aggregate InTrade’-s PR output.
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As for the “-business development initiatives”- planned by the InTrade executives, I wish them the best of luck. However, I remain skeptical, since I don’-t see what can replace the 2008 US elections in terms of attractiveness —-now that the SuperBowl has been sacrificed.
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TradeFair, soon.
Not a bad idea, but not the best idea they could have.
The EPS prediction markets were a better idea, because they have many more primary indicators.
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TradeSports will terminate itself on November 28, 2008.
A very sad day (which I am not glad to report that I predicted would happen). TradeSports is probably the latest victim of both the Unlawful Internet Gambling Enforcement Act of 2006 and the Louisiana prosecutors. It is also the victim of a lack of support from the prediction market luminaries. As for the pertinence of the InTrade-TradeSports splitting that was started in 2007, I leave this issue to the business historians.
InTrade (which does not float event derivatives on sports) is caught in the same regulatory net, but CEO John Delaney hopes that the CFTC could soon legalize event derivative exchanges —-except those on sports. That is far from certain, though. And InTrade’-s heyday is now over. See you in 2012, for the next presidential election.
The Sporting Exchange (which operates BetFair) is making a very different bet: the United States of America will one day legalize the betting exchanges and the trading on sports. That is a reasonable, long-term bet. But not all the Democratic legislators favor Internet gambling and betting —-far from it. We will see.
The future is spelled “-BetFair”-, but many of my readers don’-t like the way they display odds —-Americans prefer probabilities.
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Dear George,
Congrats for the launch of AskMarkets. Best wishes to your prediction exchange and consulting firm.
Here’-s the perfect opportunity to ask you the “-question that kills”-:
What was the social utility of the political election prediction markets during the 2008 campaign?
In other words, why should the media have informed people about the InTrade probabilities at a time Nate Silver did a near-perfect job forecasting the 2008 US elections?
What’-s the added value of the political election prediction markets over the poll aggregators?
Can you cite one prediction market (other than the “-who’-s gonna become president?”- prediction market) that has a high social utility?
Each time I ask this question to one of the prediction market luminaries (or so they think they are), I get back the same glance I would get from a dead trout —-so I would appreciate if you could attempt to answer my question by publishing a blog post on Midas Oracle.
Best regards,
Chris Masse, bombastic blogger
http://www.midasoracle.org/
Let’-s not confuse media visibility with utility. Aside from the depressed Obama-to-win prices on one exchange, prediction market and polling aggregation results for the 2008 election were essentially the same using squared errors. Despite his insane schematics, Emile Servan-Schreiber has a good point about capturing the interest of the public, something that nerdy academic and libertarian-types aren’-t necessarily good at. An Obama-backing baseball statistician out of Daily Kos nailed that part this year, a year where people were especially skeptical of markets, not to mention unregulated “-offshore”- ones. Likewise, if you put down the lens of considering markets as commission generators, you’-ll see the value of contracts tied to social and cultural outcomes. Of one the biggest assets of prediction exchanges is media goodwill, which should be fostered by distilling information on subjects like global development and art prices.
Other things to keep in mind:
He and his co-authors were the first to publish about the fact that flu-related searches on the Web are precise predictors of the upcoming influenza outbreaks.
Congrats.
Best wishes for the rest of their scientific career.
[*] “-Make him a Saint, now!”-, in Italian. 
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I’-ve used the Bob Barr contracts at Intrade to poke fun at the totally unrealistic expectations of Libertarian Party advocates (a couple times at Midas Oracle), so here’-s a brief (and completely amateur) analysis of those contracts (and Nader contracts), post-election.
You may need to click on each chart to see the whole thing.
The probability of Barr obtaining 1% or more of the vote remained about .4 (40%) throughout the past several months. More optimistic scenarios became more discounted as the election grew nearer, and presumably it became clear Barr would not break through. Even 1% would have been seen as a breakthrough by LP advocates, but in the end Barr obtained only 0.4% of the vote. (Note that obtaining .4% of the vote and a .4 probability of obtaining 1% of the vote are very different things!)
Ralph Nader contracts attracted very little trading, though the 1% or greater contracts gave Nader a 60% chance of obtaining 1% of the vote as late as early October. Nader contracts for 3% and above did not trade at all —- or almost not at all —- Intrade’-s web page table (screenshot below chart) shows a few trades, but no advanced chart or closing price/volume download, and there seemed to be an (unrelated?) possible bug with Nader contract reporting fairly consistently —- last trade prices would not be remembered and reported in the aforementioned table —- or it could be user (me) error/misunderstanding.
Both Barr and Nader contracts were traded heavily (for them) post-election, presumably as traders freed up cash and unwound positions —- for unkown reasons Intrade still has not expired the contracts.
Spurred by comments from David Nolan (scan the page for “-Intrade”- or my name), I also attempted to gauge what traders thought about the average vote percentage candidates would receive across all scenarios —- even a small chance of a genuine breakthrough could make an otherwise hopeless campaign (in the LP’-s case, 9 such presidential campaigns prior to 2008) worthwhile. See below for the average (not most likely!) vote percentage over time each candidate might be expected to receive if the campaign were re-run may times. Assumptions: a floor of .5% (cases in which 1% is not met), very generous given that Barr did not reach even that, and only one LP candidate ever has, if candidate crosses threshold, they do so by .5%, also generous, and if 7% (the highest contract) is crossed, they obtain 7.5% of the vote, slightly ungenerous given the non-impossibility of obtaining a much higher percentage of the vote. Longshot bias should also expected to be at play. I don’-t think these numbers should give LP or other third party advocates any comfort, though I admit my own bias on the matter. The average of all Barr scenarios declined steadily as the election approached, while Nader contracts did not trade until closer to the election, and they both ended at an average of 1% across all scenarios just before the election.
In the end Nader received 0.54% of the vote, beating Barr for (a very distant) third place behind Obama and McCain.
All of the data used above may be found in intrade-2008-barr-nader.zip. The spreadsheet file intrade-2008-barr-nader.ods aggregates everything.
2012
I’-d like to see: