The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model’s structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics.
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FOLLOW UP
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Wiki News (Wikipedia’-s twin site devoted to news edited by anyone) has a long article on that scandal, agitated by ValleyWag, and denied by TechCrunch. I’-m on the side of ValleyWag’-s Paul Boutin, on that one. The media should start asking the hard questions. [I’m not saying that Jimmy Wales, who has earned our respect, is a culprit. I’m just saying that the media should investigate more on that.] And blogger Mike Linksvayer, who urged us many times to contribute US dollars and French francs to Wikipedia, should do too.
UPDATE: New York Times
Take a look.
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ABC News
PDF file
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Do you, guys/gals, have any information about him?
Read the previous blog posts by Chris F. Masse:
Jason Ruspini went overboard on BBN TV, claiming his tax futures markets will become InTrade’-s most popular ones in 2009, but he managed to control well his descent to Earth:
[Y]es they have lost a lot of steam and that statement seems overconfident at this point, – or has always [been] for that matter. There was no real follow-through to the apparent trend of the first week or so. Lack of news flow is the main culprit. […]
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Enterprise prediction market consultant Jed Christiansen:
Predictify – Predictify has been in the mainstream blogs a bit recently with a couple of mentions on the Freakonomics blog. Unfortunately, Predictify really isn’t a prediction market… it’s a sophisticated polling and market research mechanism. That’s not to say it doesn’t use the “wisdom of crowds,” just that some of the assumptions that James Surowiecki talks about in his book don’t necessarily apply. The reason I say it’s not a market is that a user cannot express their confidence in their prediction. It makes it difficult to sort out the knowledgeable forecasts from the un-knowledgeable forecasts. Unique about Predictify is that companies can submit market research questions, and those that predict right can win the fees that the company pays to Predictify for the listing.
Previously: LongBets + Predictify
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Freakonomics:
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Predictify may be a fine “for dummies” prediction game, but it certainly isn’t prediction “market”. It’s rather more like parimutuel betting. The distinction is important because prediction markets reward people not just for being right, but for being right before others. Prediction markets have demonstrated again and again their ability to aggregate information and produce accurate predictions, whereas prediction games like Predictify still have everything to prove.
It is deeply misleading to call any wisdom-of-crowds contraption a prediction market.
— Posted by Emile Servan-Schreiber
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I agree with Emile here.
Predictify appears to me to be a more sophisticated polling site. In a market, there is an element of risk and consequent reward. I might be willing to risk $100 on my forecast of the presidential election, but only $10 on my forecast of the World Series. That is taken into account in a prediction market, or market of any type.
Most markets allow buying and selling, which could also “lock in” profits based on price movements. While you can change your vote on Predictify, that doesn’t make you any money, real or virtual. You’re just registered as changing your vote.
While polling certainly is an information aggregation mechanism, and fits into the “Wisdom of Crowds,” it doesn’t really appear to be a “market.”
— Posted by Jed Christiansen
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Jed and EJSS, a prediction market consultant, and the CEO of a struggling prediction market company, make valid points, but WHO CARES? The general public certainly doesn’t. You can continue to quibble all you want and ride the high horse, but if Predictify works, it works, and that’s all anyone cares about. Let’s at least congratulate them on coming up with a unique model.
— Posted by Smack Fogarty
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Smack,
I think the “valid points” here are pretty important, because they are actually questioning whether Predictify works or not. There doesn’t seem to be any evidence that it does – that’s the point.
— Posted by Matt
Via Gawker (which I’-m paraphrasing), the New York Times warns us that there might not be enough Internet left for the rest of us!
In a widely cited report published last November, a research firm projected that user demand for the Internet could outpace network capacity by 2011.
It’-s true: there is only so much Internet, and Robin Hanson and his folks at OvercomingBias.com (a boring philosophy blog, where the prof blablates on angels’- gender with his students) are using like all of it. Look at the damming evidence, the trend shows clearly that the implosion of the known Universe is next:
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Maybe the gullible and intrepid Robin Hanson fanboys will take comfort in the fact, reminded to us by Gawker, that engineer Robert Metcalfe predicted in 1995 that the Internet would suffer from a “-catastrophic collapse”- in 1996. 
Read the previous blog posts by Chris F. Masse:
The announcement is here.
I asked for them at the end of 2006/beginning of 2007 (the post was on Jan 10 2007, but I think I requested them first). A conversation at Midas Oracle, a few months later.
The Contract Rules need more precise specification. While Intrade did use my suggestion of the Goddard Institute for Space Studies data to value the contract, I think Intrade must specifically state that the “-J-D”- January-December annual mean temperature series is being used, and on either the Global Mean Monthly data set, or else the Global-Land Ocean Temperature Index data set.
I personally prefer the latter, as ocean temperatures play a huge role in ice melts as well as other weather phenomena (e.g. hurricane frequency and intensity, even this political advocacy group pretending to be scientific says so). In any case, the two series are generally correlated well, so I have no strong preference which one Intrade specifies.
I used the latter of course, in working with Adam Siegel and the folks at Inkling Markets to create the very first Global Warming prediction market.
Cross-posted from Caveat Bettor.
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