Via Barry Ritholtz (author of Bailout Nation)
You cant have accumulator bets on the weather of neighboring regions…
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Why an analyst should assess each newly created prediction market
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’-s event derivative prices:
– InTrade’-s event derivative prices:
– HubDub’-s event derivative prices:
Chicago wont have the Olympics in 2016.
The Chicago candidacy, which was favored by the prediction markets (and bettors like Ben Shannon), is the one that fared the worst.
– “-Will Chicago get the Olympics? Dona€™t bet on it. Too risky.“-
– The prediction markets are not able to forecast which country will get the Olympics. The IOC is a close aristocratic group that does not leak information. Hence, it is not possible to aggregate information.
– Once again, Ben Shannon made a very bad bet. He should read Midas Oracle more often —-if he wants to avoid personal bankruptcy.
– Once again, we see that the P.R. agents of InTrade and BetFair (who both bragged about being able to predict Chicago) were overselling.
– BetFair’-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):
– InTrade’-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):
– HubDub’-s event derivative prices:
Professor Thomas Rietz (Iowa Electronic Markets) was so wrong on the usefulness of prediction markets about the 2016 Summer Olympics in Chicago.
Chicago Olympic Market Might Have Value, Says Reitz (Chicago Tribune, April 17)
A credible source of information about Chicago’-s chances of hosting the 2016 Olympics would have value, says columnist Bill Barnhart. Local real estate developers, hotel operators, employment agencies, vendors of products and services to major events and others have a direct stake in whether or not an Olympics is staged here. Politicians and civic leaders presumably would want to know whether the city’-s bid has a chance, so that they wouldn’-t throw good money after bad. An auction market centered on whether Chicago will win could provide that information, even if there were no huge payoff for hedgers or speculators, said finance professor THOMAS RIETZ at the University of Iowa, a board member of the popular Iowa Electronic Markets. The Iowa market limits wagers to $500 but has an enviable track record in picking the winners of national elections. “-Our goal is to aggregate information, which is a different goal than being able to hedge the economic risk associated with something like this,”- Rietz said. “-I don’-t think it’-s an outlandish idea.”-
http://www.chicagotribune.com/business/yourmoney/chi-0704160447apr17,0,2547860.column?coll=chi-business-hed
Prediction markets on which country will host the Olympics have never worked.
– BetFair’-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):
– InTrade’-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):
– HubDub’-s event derivative prices: