NewsFutures Election Contest – Actually Win Something

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Yesterday, NewsFutures launched a new contest on the US election, focusing on swing states. A way for us to beta test some new technology and some new UIs (this blogger/trader seems to like it so far.) As a reward, we&#8217-re offering X$5,000,000 to the best traders. That&#8217-s play money, but it&#8217-s significant play money: if you had X$5,000,000, you&#8217-d be ranked 21st on NewsFutures today, and you could trade your play money for a $100 Amazon Gift Certificate, not just bragging rights.

Check it out: http://vote08.newsfutures.com/vote08/index.html
It&#8217-s free, it&#8217-s fun, and you may actually win something

The New York Times on InTrades US political election prediction markets

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The NYT writers discusses 2 (different?) issues.

#1. There was market arbitrage opportunies in the recent past between InTrade and BetFair &#8212-unlike 4 years ago, and contrary to the laws of economics.

– The price of the Barack Obama event derivative was cheaper on InTrade than on BetFair and the Iowa Electronic Markets. Conversely, the price of the John McCain event derivative was more expensive on InTrade than on BetFair and the Iowa Electronic Markets.

#2. The NYT writer reports (without linking to it) the findings of the InTrade investigation about the behavior of their unnamed &#8220-institutional investor&#8221-.

– InTrade CEO John Delaney suggests that that institutional investor:

  1. might operate on InTrade at specific times where it might not be able to find liquidity on BetFair and/or IEM-
  2. might be a bookmaker willing to hedge its risks on a prediction exchange (a.k.a. betting exchange).

– Justin Wolfers&#8217- PHD student remarks that that institutional investor is not making an effort to shop around for the best prices, within each InTrade political prediction market.

RELATED: See the comments on Midas Oracle here, here, here, and here.

Are we witnessing manipulation attempts on the Florida prediction market at InTrade?

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Florida went blue around 8:51 PM, on September 26, 2008&#8230- for a brief period of time:

The Democratic side:

Tip via Lance Fortnow

Previously:Is InTrade being manipulated?

UPDATE: See Jason Ruspini&#8217-s expert analysis in the comment area.

Is this a sign that the BetFair prediction exchange and the BetFair blog are not the best sources of information on the 2008 US presidential elections?

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Previously:

– the latest InTrade predictions

– Emile Servan-Schreiber&#8217-s post on market arbitrage

2008 US Elections Prediction: John McCain is now the favorite at InTrade, while all the other prediction exchanges still have Barack Obama ahead. Is InTrade quicker to incorporate the latest polls because of the bigger liquidity of its prediction markets?

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#1. Explainer On Prediction Markets

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.

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

#2. Probabilistic Predictions = Charts Of Prediction Markets

Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

2008 US Elections

InTrade

2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland = electoralmarkets.com

– This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

Intrade 2008.PRES.McCAIN > PRESIDENT.REP2008

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How frequent are arbitrage opportunities such as the following?

In addition to title, the reverse is true of OBAMA/DEM.

Do traders really think there&#8217-s some probability of McCain being elected as an idependent and Obama being replaced as the Democrat nominee?

Multi-millionaire, Republican, professor of economics Greg Mankiw uses Jason Ruspinis tax prediction markets at InTrade to assess the probability that a hypothetical John McCain presidency starting in 2009 assumes a raise in federal taxes.

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Via Marginal Revolution

P(tax hike / McCain) = 74%.

APPENDIX: Robin Hanson does not know yet who he is going to vote for, in November 2008&#8230- and feels that no scholar can help him.

2008 US ELECTORAL MAP PREDICTION: The 2008 US elections thru the prism of the prediction markets – 2008 US presidential and congressional elections – US President Prediction + US Congress Prediction – Barack Obama vs. John McCain

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#1. Explainer On Prediction Markets

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.

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

#2. Probabilistic Predictions = Charts Of Prediction Markets

Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

InTrade

2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland = electoralmarkets.com

– This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

Prediction Markets for the 2008 Electoral College = US Electoral Map

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Interesting blog post from Lance Fortnow on the VP prediction markets. (I will soon blog about those.)

InTrade – Electoral Markets Map

Their brand-new widget:

The vetting of the many potential Democratic vice president nominees was not as secretive as I thought. – Bo Cowgill was right, in hindsight.

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The New York Times has a recount on how Barack Obama reached his decision on Joe Biden. The final decision was probably made 10 days ago, while Barack Obama was vacationing in Hawaii.

[…] Mr. Obama’s decision had as much to do with Mr. Biden’s appeal among white working-class voters and compelling personal story, and his conclusion that the Delaware senator was &#8220-a worker.&#8221-

The important information in the NYT piece is that Barack Obama personally called governor Bill Richardson &#8220-late last week&#8221- to announce him that he was not considered anymore. That&#8217-s around the time the Joe Biden rumor began to have more weight in the media circles &#8212-see the InTrade chart below.

Bo Cowgill, back in May 2008 (when I started to act as a prophet of doom):

This is dumb. Cover them if something interesting happens. Maybe your theory will turn out to be wrong. Anyhow: Although the decision is made in secrecy, the Presidential nominees have a number incentives which we have plenty of information about. Specifically:
* They want someone who will balance their tickets in terms of geography, race and class.
* They want someone who will help with weak areas of their campaigns.
* They want someone who will be a good campaign surrogate — giving good speeches and attacking the opponents effectively.
* They want to avoid a VP who will de-motivate or offend the base.
* They want to avoid someone with a bunch of skeletons in the closet such as angry ex-wives, out-of-wedlock kids, etc.
* Etc etc.
Anyhow, I don’t see any reason to ignore these markets in case something interesting happens. I read Midas Oracle so that I don’t *have* to read a whole bunch of other websites!

Bo Cowgill was on the right track, now that I think of it &#8212-in a society where everything leaks out.

On the opposite of the spectrum, Tom Snee was too much extreme in his view:

According to Tom Snee of the Iowa Electronic Market, at Iowa University, futures markets need more hard information than they get in the veepstakes, to reliably predict a result.

Markets are very good at predicting elections, he says – but not choices being made inside Barack Obama&#8217-s or John McCain&#8217-s head.

Justin Wolfers was more measured.

So, Bo Cowgill and Justin Wolfers are the winners, on that one.

I was partially wrong. I am a bit too extreme, sometimes. (Did someone else notice that? :-D ) I need to learn more about&#8230- granularity.

PS: On the Republican side, now&#8230-

Price for 2008 Republican VP Nominee (others upon request)(expired at convention) at intrade.com

Who will be the Republican Vice Presidential Nominee?