Ubber finance blogger Barry Ritholtz believes in magic. He believes that, with more volumes on the event derivative markets, comes the Omniscience -capital O.

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Our good friend Barry Ritholtz.has persuaded himself that our real-money prediction markets suffer from an irremediable and fatal problem: liquidity on political event derivative markets is too thin for smart Wall Street people like him to take their market-generated probabilities seriously. Barry Ritholtz is keen to tout oranges&#8211-apples comparisons: the NYSE volume versus the Obama&#8211-Clinton volume at InTrade. It&#8217-s a bullshit argument, but he managed to persuade some gullible journalists writing for some clueless mainstream media that thin liquidity was responsible for the New Hampshire upset &#8212-and else.

Barry, if you had 1,000,000,000 trades on the New Hampshire prediction market, you&#8217-d still have an inaccurate prediction. The polls were wrong, and there&#8217-s nothing &#8230- NOTHING&#8230- that the InTrade and BetFair traders could have done to get this election right. Get over it, Barry. Traders are not magicians. :-D

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[For why the polls were wrong, see: The New York Times, Zogby, Rasmussen, Gallup…]

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BetFair Malta outputs a simplistic prediction game (about the 2008 European soccer tournament). Im not impressed at all.

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  1. Simplistic enough. Sounds more like a promotion trick than a real game.
  2. The Sporting Exchange has outsourced the development of this game (and others) to a Swedish team.
  3. The Swedish people won a &#8220-multi-year&#8221- contract. I don&#8217-t understand which partner is responsible for the creation of future games. Probably both, but it&#8217-s not clear. To get new game ideas, I would rather bid for them around the planet (just like book publishers and movie producers are looking out for good scripts) &#8212-as opposed to have a &#8220-multi-year&#8221- contract with someone, even a talented someone. (And in the case under my very nose, I can&#8217-t see any talent, here.)
  4. In both Internet Explorer and Mozilla FireFox, there are usability problems, as you can see in the screen shot. This BetFair site (just like their corporate site) was not designed to be fluid. A shame.

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Previous blog posts by Chris F. Masse:

  • Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
  • Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
  • How does InTrade deal with insider trading?
  • Modern Life
  • “The Beacon” is an excellent blog published by The Independent Institute.
  • The John Edwards Non-Affair… is making Memeorandum (twice), again.
  • Prediction Markets = marketplaces for information trading… and for separating the wheat from the chaff.

Robin Hanson would be better off lobbying for prediction markets with the people who will be in power next November -that is, the Democrats, not the right-wing people of the American Enterprise Institute.

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Does Robin Hanson read the political prediction markets which he co-invented? If he read them, he would see that we&#8217-re going to get a big Democratic swipe, in November 2008. The American people will get rid of the neo-cons, the warmongers, and other right-wing nuts.

Then, if you wanted to &#8220-lobby&#8221- for the prediction markets, you would get your message thru using either a Democratic or bi-partisan vehicle &#8212-not the right-wing American Enterprise Institute. What weight will those right-wing people carry next November? They&#8217-ll be finished &#8212-until a brand-new Newt Gingrich alike pops up in the years 2020.

Get a ride in K Street with the right people, doc &#8212-that is, in our case, like it or not, the leftists.

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75,000 people turned out to hear Barack Obama at Waterfront Park, Portland, Oregon, U.S.A.

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Record Obama Crowd, the Size of a City

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Oregon&#8217-s Democratic Primary

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InTrade

Price for Oregon Democratic Primary. May 20th at intrade.com

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BetFair

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Kentucky&#8217-s Democratic Primary

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InTrade

Price for Kentucky Democratic Primary. May 20th at intrade.com

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BetFair

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NewsFutures

Some delegates from FL or MI will be seated at the Democratic Convention.

© NewsFutures

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First look at individual states for the 2008 US presidential elections

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2008 US Presidential Election Winner – Individual

Price for 2008 Presidential Election Winner (Individual) at intrade.com

Price for 2008 Presidential Election Winner (Individual) at intrade.com

Price for 2008 Presidential Election Winner (Individual) at intrade.com

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2008 US Presidential Elections

Source: Dynamic, compound prediction market charts from InTrade

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Next US President

Next US President

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Winning Party

Winning Party

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Female President?

Female President?

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Democratic Candidate

Democratic Candidate

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Republican Candidate

Republican Candidate

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Source: BetFair Politics Zone

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Barack Obama to win the Democratic nomination


© NewsFutures

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Hillary Clinton to win the Democratic nomination


© NewsFutures

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Next US President Will Be Democratic.


© NewsFutures

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Next US President Will Be Republican.


© NewsFutures

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Explainer On Prediction Markets

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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&#8230- Intelligence in, intelligence out&#8230-

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.

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More Info:

– The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

– Prediction Market Science

– The Midas Oracle Explainers On Prediction Markets

– All The Midas Oracle Explainers On Prediction Markets

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ROBIN HANSONS PUBLIC ADMISSION: He signed Bobs petitions, not because he heartfully endorsed them fully, but because he wanted to please Bob, didnt want to be left out of the party, and was persuaded that his own blue-sky proposals wouldnt make it -and other irrational excuses for not saying the tru

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Robin Hanson:

Hal and Silas, endorsing this proposal does not mean that I would not prefer other proposals- it just means I prefer this to the status quo. Chris Masse is an example of someone who has difficulty accepting this endorsement concept.

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Doc,

Why wouldn&#8217-t you:

  1. Gather with yourself and determine under what precise circumstances you want the real-money prediction markets (which you co-invented with the IEM people) to flourish in your country-
  2. Then, consult with your peers (Wolfers et al.) on whether they&#8217-d agree with you-
  3. Publish a petition that lays out how the real-money prediction markets would blossom in America-
  4. Add, at the bottom of that petition, an appendix laying out what would be, for you, an acceptable Plan B-
  5. Hummmm&#8230-.??&#8230- Sounds more logical to me.

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Previous blog posts by Chris F. Masse:

  • Prediction Markets
  • Meet professor Justin Wolfers.
  • Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
  • Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
  • How does InTrade deal with insider trading?
  • Modern Life
  • “The Beacon” is an excellent blog published by The Independent Institute.

Land-Ocean year-to-date temperatures 0.35 Celsius over baseline

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according to GISS. Assuming the Intrade &#8220-Top 5&#8243- global warming contract expires according to the Land Ocean Index, May – Dec 2008 temperatures will need to average 0.65 Celsius over baseline. The record was set back in 2005, 0.62 Celsius over baseline.

Intrade needs to specify the expiry conditions more precisely.

Still, I&#8217-m remain short the contract:

Cross-posted from Caveat Bettor.

Previous blog posts by Caveat Bettor:

  • Final InTrade v. Zogby Showdown Results
  • Intrade lists Global Warming Contracts!
  • Intrade beats Zogby on Super Tuesday
  • Super Tuesday Showdown: Intrade v. Zogby
  • The Democrat SC Showdown: Intrade v. Zogby
  • Zogby beats Intrade in predicting Nevada caucus winner Clinton.
  • The GOP SC and Dem NV Showdown: Intrade v. Zogby

The BetFair-Fallon debacle cost British taxpayers ?950,000.

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Jesus.

Thank God I don&#8217-t pay my taxes in the UK. I&#8217-d be furious at BetFair and at the British Police.

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NEXT: Has BetFair a little part of responsibility in the collapse of the Kieren Fallon trial?

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Previous blog posts by Chris F. Masse:

  • A second look at HedgeStreet’s comment to the CFTC about “event markets”
  • Since YooPick opened their door, Midas Oracle has been getting, daily, 2 or 3 dozens referrals from FaceBook.
  • US presidential hopeful John McCain hates the Midas Oracle bloggers.
  • If you have tried to contact Chris Masse thru the Midas Oracle Contact Form, I’m terribly sorry to inform you that your message was not delivered to the recipient.
  • THE CFTC’s SECRET AGENDA —UNVEILED.
  • “Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”
  • Meet professor Thomas W. Malone (on the right), from the MIT’s Center for Collective Intelligence.

The managing editor of CNBC.com asks readers whether they should report what the (play-money and real-money) prediction markets say. He is not that hot on the idea -to say the least. Which is why we should develop a blog network on prediction markets -to get rid of the journalists filter and report

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But the &#8220-gambling&#8221- nature puts some journalists off.

Is it just providing information &#8230- or promoting betting action?

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See, that&#8217-s exactly why I want to develop my &#8220-Midas Oracle Project&#8221-.

Classic journalists and classic bloggers will never treat prediction markets with the maximum sophistication they deserve.

Only brand-new blog networks that will specialize in prediction markets will do a good job.

I&#8217-ll provide more details soon.

I hope that some of you will join this project. It should be a collective endeavor.

E-mail me to join.

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Robust, the prediction markets are the best mechanism for aggregating information. Thus, companies should use them for assessing strategy and hedging risks.

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Via Emile Servan-Schreiber of NewsFutures, John Auters in the Financial Times.

[…] This leads to [Justin Wolfers]&#8216- claim that [prediction markets] are the best way to aggregate information. This is true of any given amount of information. Take three economists and make them trade out a market over their predictions for next month&#8217-s inflation number, he suggests, and they will arrive at a more accurate prediction than a poll of the same three economists. In a market, those with stronger conviction (or inside information) can express that conviction- those less confident will not be willing to stake money. […]

Prediction markets remain subject to the same weaknesses as other markets. The principle of &#8220-garbage in, garbage out&#8221- [*] applies. If there is only poor information to aggregate, they will be as wrong as everyone else. […]

It would make sense to incorporate these odds when making investments. […]

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Excellent.

(I don&#8217-t get his micro slam against the wisdom of crowds. Anyway.)

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[*] As explained in the prediction market explainer published on the frontpage of Midas Oracle.

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