Smart *** Mike Linksvayer (who has an opinion on anything) doubts that the number is that high. (How does he know??? How dare of him to contredict Robin Hanson, the master of the Universe???) What do you think, guys and gals?
(((And I renamed the Midas Oracle post category, “-Track Records”-, to read now “-Prediction Registries“-. See, even though I roast Mike Linksvayer publicly, he has a profound impact on moi.)))
This is a recent picture of traitor Mike Linksvayer (much better than the New York Times picture where he looked like an angry chimp):
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First, Mike Linksvayer sided with moi:
[Hollywood Stock Exchange] could be an indicator that the [TradeSports] price is wrong and in which direction, which is enough for a [TradeSports] trader to place an order.
Then, as soon as I turned my back, he sold me down the river (I should have known!!!!!!):
I agree with everything you [you = Sacha Peter] write in the last comment (and your original challenge to CFM to put his money where his mouth is).
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#1. HSX “-prices”- are predictive (see The effectiveness of pre-release advertising for motion pictures – PDF – by Anita Elberse and Bharat Anand – 2005-03-05):
Despite the fact that the simulation does not offer any real monetary incentives, collectively, HSX traders generally produce relatively good forecasts of actual box office returns (e.g. Elberse and Eliashberg 2003, Spann and Skiera 2003). According to Pennock, Lawrence, Giles and Nielsen (2001a- 2001b), who analyzed HSX’-s efficiency and forecast accuracy, arbitrage closure on HSX is quantitatively weaker, but qualitatively similar, relative to a real-money market. Moreover, in direct comparisons with expert judges, HSX forecasts perform competitively.
#2. You can investigate accuracy and precision scientifically- no need to back one’-s research paper with one’-s money.
#3. My original question was: “Should I use HSX info to speculate at TradeSports?”. Looking at HSX and TradeSports odds, maybe The Departed is correctly priced or underpriced at TradeSports, and maybe Babel is underpriced at TradeSports.
…- More exactly TradeSports-InTrade and Iowa Electronic Markets VERSUS The McLaughlin Group (PBS).
Reason Magazine writes:
Weirdly, the McLaughlin Group, the fustiest of all the talking head shows, had one of the best records this cycle, with Eleanor Clift, Lawrence O’-Donnell, and John McLaughlin all predicting Democratic takeover of the Senate and calling nearly all of the close races correctly. Still, that old line about stopped clocks comes to mind.
Reality Check:
Vo, vo, vo. Not so fast. The McLaughlin Group is made up of five members. Three of them predicted the Dems in the US Senate, and so (if I’-m correct) the associated probability was 3/5 = 60%. It does not strike me as an unanimous consensus.
As for TradeSports, Professor Lance Fortnow wrote that all (NOT: “-nearly all”-) individual 2006 US Senate races were predicted correctly.
More Links:
– The McLaughlin Group (PBS + CNBC Europe)
– 2006-11-03: Transcript – Audio (MP3) – Video (MP4) –
Parting Shot:
If the small-L and capital-L libertarians at Reason Magazine sides with the leftist bloggers and media in the anti-PM backlash, and if some from-day-one prediction market supporter goes amock, then the logical conclusion is: The Prediction Markets Have NOT Arrived Yet.
…- Psstt…- TradeSports traders…- Wanna be rich?…- Do like David Pennock: Get a PhD…- with a major in probabilities…-
Although TradeSports’s individual state predictions and overall Senate prediction were entirely consistent, one might argue that traders underestimated the degree of dependence (correlation) among states’ elections. In fact, I made a few bucks selling the “GOP Senate control” contract on TradeSports using exactly that reasoning. The truth is, I probably just got lucky, and it’s nearly impossible to say whether TradeSports underestimated or overestimated much of anything based on a single election. Such is part of the difficulty of evaluating probabilistic forecasts.
Republicans: 49%
Democrats: 53.8%
Ex-BBC News Mike Smithson (of the Political Betting blog) wonders whether BetFair will count the two Independent U.S. Senators (Liberman and Sanders) in the Democratic camp.
Lieberman won re-election as the “Connecticut For Lieberman” party candidate – an independent political party he created after losing the 2006 Democratic primary election to Ned Lamont. He has said he will sit as part of the Democratic Senate caucus in the upcoming 110th Congress.
Sanders won yesterday in Vermont as an independent but will caucus with the Democrats and it is said will be counted as a Democrat for the purposes of committee assignments.
The problem that Betfair will have to resolve is that neither ran as a Democrat although they will be attached to the Democrats in the Upper House.
To add to the complication Nick Palmer, MP, posted this on the previous thread at 1.34pm – “I have it in writing from Betfair that they will count the two independents as Democrats. (I asked them a month or two ago before I put a tenner on.) If you have opposite advice in writing, they should be embarrassed!”.
Addendum: From one commenter…-
The question was “Which of these parties will have more seats in the US Senate following the 2006 US Senate Elections?”
The options were Republicans and Democrats. The result is 49-49 with two independents.
It’s a draw- I can’t see how anyone can see otherwise.
Addendum 2: From Yahoo! News (whose data are provided by the Associated Press)…-
Liberman (CT) and Sanders (VT) are counted as Democrats.
Addendum 3: From the Washington Post frontpage…-
Editor’-s Note: Independent members of Congress typically caucus with the Democrats.
Addendum 4: From the New York Times…-
Full Senate Results —- Republican: 49 —- Democratic: 50 – Includes independents who align with the Democratic caucus. —- [CFM’s NOTE: Virginia is still in play at the time of writing.]
Addendum 5: Mike Smithson…-
So punters who are tempted into this market are risking money on how they think Betfair will settle the market.
Hello Professor Tyler Cowen and all the commenters,
#1. Professor Lance Fortnow made a specific point: taken one day before Election Day, the TradeSports’-s prediction markets of the individual races for the US Senate were accurate (provided that Virginia and Montana go democratic).
#2. Professor Lance Fortnow DID NOT SAY that the TradeSports’-s prediction market for the control of the US Senate was accurate. Please, don’-t put words in his mouth.
#3. Analysis reports from economists and statisticians are coming, but, please give them time to digest the data…- once the dust has settled.
Thanks for your attention,
Chris Masse
The breaking news is that Professor Justin Wolfers (of the Wharton business school in Philadelphia) has responded to my unforeseeable attack and to the subsequent Mike Linksvayer’-s comment.
A quick response to Chris:
Let me clarify what I think the key puzzle is: the odds of either Democrats or Republicans are – literally – unchanged since the week before the 2004 election. It seems amazing to me that there has been *no news* that is relevant to the 2008 election.And I don’t really know which way it should have gone (I’m not yet calling ‘08 for the Dems). For instance, Bush winning in ‘04 provides the Republicans with an incumbency advantage. Countering that, the last two years have provided the Dems with an advantage in the midterms, which you might think could persist to ‘08. And the cast of possible candidates is also starting to take shape, and the absence of Warner, the rise of Barak, and the continuing dominance of both Hillary and McCain are all important factors that we didn’t know about two years ago. All of this is hard to reconcile with the odds remaining unchanged.
I[n] response to Mike’s point: he is exactly correct to emphasize the difficulty in discerning the direction of causation between election outcomes and economic outcomes. But that is precisely the point of my forthcoming QJE paper with Snowberg and Zitzewitz (available at: PDF).
In that paper (which is what I describe in the WSJ), we look at stock market reactions to what are clearly random (or exogenous) shocks to the expectations of Bush’s re-election – the leaked exit polls, and the subsequent vote count. These experiments allow us to draw inferences about how changes in electoral prospects drive economic outcomes.
The Abstract Of That Paper:
Partisan impacts on the economy: Evidence from prediction markets and close elections – by Erik Snowberg, Justin Wolfers and Eric Zitzewitz – (PDF) – 2006-03-XX
Analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during Election Day. Analyzing high frequency financial fluctuations following the release of flawed exit poll data on Election Day 2004, and then during the vote count, we find that markets anticipated higher equity prices, interest rates and oil prices and a stronger dollar under a Bush presidency than under Kerry. A similar Republican-Democrat differential was also observed for the 2000 Bush-Gore contest. Prediction market based analyses of all Presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican President raises equity valuations by 2 3 percent, and that since Reagan, Republican Presidents have tended to raise bond yields.
How Much Do Election Shakeups Affect the Nation’-s Economy? – [US politics &- financial markets] – by Justin Wolfers and Mark Thoma – 2006-11-03
[Justin Wolfers] And the major puzzle that I currently see? The past two years have clearly been terrible for Republicans, with Iraq deteriorating, Katrina undermining the public trust, and corruption scandals aplenty. And consequently their chances of keeping control of the House have fallen precipitously (Intrade.com charts here). But the real surprise? Prediction markets tell us that the odds of Republicans winning the White House in 2008 remain virtually unchanged. Neither the incumbency advantage coming from victory in the 2004 elections, nor the subsequent declines in Republican fortunes have shifted the odds (chart: here), and the 2008 Presidential election remains a coin flip. Stay tuned: It looks like Tuesday will be a long night. And when the counting ends, the two-year campaign for the White House begins.
My Take: Our good doctor Justin Wolfers takes his Democratic dreams for the reality (all that said in all due respect for this bright researcher). We’-re two years away from the November 2008 presidential election. The margin of error is still enormous, so today’-s market-generated probabilities (Dems: 48.6% – GOP: 48%) for the 2008 presidential race mean strictly nothing. Plus, at times, a US presidential candidate can get substantial votes from the other camp (e.g., Ronald Reagan seducing many Democratic voters, etc.).
Addendum: Mike Linksvayer has an interesting comment, attached below this blog post.
Addendum 2 (November 04): Professor Justin Wolfers has responded, in the comment area, below this blog post. (And his paper is excerpted here, on Midas Oracle.)
In today’-s soapbox:
Yet it turns out that in 2002, IEM markets indicated that Republicans would lose the house. Which we now know is wrong. They were pretty consistent in their 2004 presidential prediction, however. I recall that Surowiecki discussed the fact that the predictive markets for congressional elections tended to be less accurate than the presidential ones–-because fewer people got involved in the betting.
Wrong. Volumes are OK. If I remember well, the polls were wrong in 2002, so don’-t look any further for the cause of failure of those IEM prediction markets.
Paper That Documents This 2002 IEM Debacle: Iowa Electronic Markets – (PDF) – by Paul Gomme – 2003-04-15
Until September, Republican control of the House was seen as a 50–50 proposition, while their control of the Senate received a probability of around 20 percent. In October, the likelihood of a Republican-controlled House fluctuated between 65 percent and 90 percent while the likelihood of a Republican Senate fluctuated around 40 percent. It was not until election day results came in that market participants locked in on the eventual outcome: Republican control of both the House and Senate. Of course, this outcome was generally a surprise: Neither pollsters nor political commentators called the Republican win in the Senate.
I Disagree With This Paragraph Of The Same Paper:
Better than Gallup? The IEM political markets have a couple of advantages over their closest “competitor,” the public opinion poll. One advantage is that data from the IEM are available virtually instantaneously and almost continuously. Results from polls are typically several days old when they are reported and are taken at discrete intervals. Consequently, data from the IEM are more amenable to studying events like the untimely death of a Senate candidate. A further advantage of the IEM is that contracts can be written based on intrinsically interesting events, such as who controls the House or Senate. Poll results require more massaging to answer such questions.
My Take: Give the polls a break, and quit saying that our predictive market-generated technology is a “-competitor”- to the polls. Without polls, the political prediction markets could return to the locker room. Plus, prediction markets aggregate probably [see comment] more than just the polls.
Hint: A public roasting of David Perry over his impersonating of George Gallup is in the tube and will be published soon on this blog.
The US Congress has approved the internet gambling ban bill. (Reuters, Wash Post). [Thanks to NY-based trader Steve Roman for the link.]
TEN CEO John Delaney has been feeding the gullible media with the concept that, because TradeSports / InTrade is a prediction exchange (not a bookmaker, or a casino), he keeps sleeping like a log, at nights, regarding the recent prosecutions against internet gambling firms’- executives.
Addendum: Steve Roman notes that the USLAW.IGAMING.JAN07 contract has skyrocketed…- maybe wrongly…-
QUOTE
Dublin, July 14, 2006: New US Law passed and signed by the US President
The contract(s) will be expired at 100 if (including but not limited to):
The 109th US Congress passes a bill and the US President signs a new law that amends the federal criminal code to prohibit persons engaged in the business of betting or wagering from knowingly accepting credit, electronic fund transfers, checks, drafts, or similar instruments, or the proceeds of any other financial transaction in connection with unlawful internet gambling. The law must be signed on or before 11:59:59pm ET on the date specified in the contract.
The contract(s) will be expired at 0 if (including but not limited to):
There is no such bill passed by Congress or the bill is not signed into law by the US President on/before 11:59:59pm ET on the date specified in the contract.
Due to the nature of this contract please also see Contract Rule 1.9 (Unforeseen Circumstances).
The Exchange reserves the right to invoke Contract Rule 1.8 (Time Protection) if deemed appropriate.
Any changes to the result after the contract has been expired will not be taken into account. Exchange Rule 1.4
You are obligated to contact the exchange by email to [email protected] if you have any questions regarding this contract before you enter an order.
UNQUOTE
Addendum: This is from a trader (scoresman923) on the TradeSports forum:
QUOTE
Tradesports,
Please discuss the passing of this new bill and let your bettors know all implications of the bill. We have invested a lot of time and money in your site and have been loyal customers. I fear for my funds invested and if you do not discuss this issue I will be forced to withdraw all funds within the next couple of months.
Thank you.
UNQUOTE
Addendum: Clarification October 5th 2006:
The above contract will expire at 100 if/when the President signs the current “-Safe Port Act”-, which includes the section Unlawful Internet Gambling, which was passed by Congress on September 29th, 2006. If he does not sign this bill or similar by December 31st, 2006, the contract will expire at Zero.