Why an analyst should assess each newly created prediction market

IOC

The Chicago candidacy, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.

As we have blogged here many times, not every prediction market is created equal. Some are bound to aggregate bits of known information. Some others (e.g., the Olympic city prediction markets) are not able to do that, because no good information is leaking out. The IOC is a close aristocratic group that does not leak out good information. Those who forgot that and bet the farm on Chicago are now licking their wounds. You need an information analyst to assess whether a particular prediction market is pertinent.

– BetFair&#8217-s event derivative prices:

chicago-olympics-betfair

– InTrade&#8217-s event derivative prices:

chicago-olympics-intrade

– HubDub&#8217-s event derivative prices:

Who will recieve the winning bid to host the 2016 Olympics?

4 thoughts on “Why an analyst should assess each newly created prediction market

  1. Michael Giberson said:

    I’m not sure that the lack of leaked information from the IOC is the right issue to focus upon. The question is whether IOC decisions can be forecasted based on information that *is* available.

    *If IOC decisions are based on publicly observable merits, then prediction market bettors should be able to make reasoned bets based on the publicly observable information.
    *Even if IOC decisions were based exclusively on privately-known, corrupt reasons, I don’t see why in principle bettors couldn’t identify the likely winner of this kind of process.

    Yes Olympic-venue prediction markets don’t have a good track record, but I don’t think the reason is the “small, secretive committee” nature of the process.

  2. Chris F. Masse said:

    “If IOC decisions are based on publicly observable merits”

    They are not. Paris was the best dossier (according to the media), last time, and London got the games.

    “Even if IOC decisions were based exclusively on privately-known, corrupt reasons, I dona€™t see why in principle bettors couldna€™t identify the likely winner of this kind of process.”

    Well, you are wrong. The mass media are not able to inform their audience about the intricacies of the IOC decisions. And some factoids get to be known *after* the IOC vote.

    QUOTE
    In surprisingly frank terms, a number of influential people in American Olympic sports questioned the performance of the U.S.O.C.a€™s new management team and said its two top executives were ill-equipped to navigate the insular world of international sports.
    UNQUOTE
    http://www.nytimes.com/2009/10/04/sports/04usoc.html

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