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For comparison, InTrade:
The topic of this post is:
Betting &- Information
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#1. Don’-t trade on the VP predictions markets.
I have stong reservations about those VP prediction markets. Only 2 men in the world know what is going to happen: Barack Obama, and John McCain.
You can’-t divine their final thoughts.
Politicians often lie about their intentions —-they also change mind, frequently.
The decision to name one VP nominee could be made in secret —-without any early warnings.
Surprise is a card that Barack Obama and John McCain could play. Don’-t bet against their final will.
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#2. Don’-t believe in “-vice presidential selection committees”-.
Last time, in 2000, a man named Dick Cheney was appointed to head George W. Bush’-s vice presidential selection committee.
He was supposed to scout around to find and assess good candidates.
Surprise, surprise, that fake committee ended up putting Dick Cheney on the Republican ticket —-and the rest is history (Iraq war, etc.).
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#3. Don’-t bet on Hillary Clinton as VP.
She does not have the slightest chance.
It’-s highly unlikely that Barack Obama selects her on the Democratic ticket.
Hillary Clinton as VP nominee (and as VP) would present many quasi insurmountable problems.
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#4. Don’-t listen to betting bloggers who tell you that Hillary Clinton has a chance to be on the Democratic ticket.
They are clueless.
Don’-t read clueless people. They are a waste of time.
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#5. Select well your primary, advanced indicators.
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#6. Choose your bets (and trades) carefully.
Just because an event derivative is cheap doesn’-t mean that it’-s a good bet.
Don’-t pluck down money on a bet unless you’-ve seriously researched the topic by yourself —-and possesses some expertise or experience in that field.
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FOLLOW-UP POST: 2 days after my ringing the alarm bell… THE FREE FALL
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InTrade
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Democratic Vice President Nominee
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Republican Vice President Nominee
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BetFair
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Next Vice President:
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Democratic Ticket
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Democratic Vice President Nominee
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Republican Vice President Nominee
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NewsFutures
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Barack Obama will pick a woman as running mate.
© 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…- Intelligence in, intelligence out…-
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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UPDATE:
– To be kept updated on the prediction markets, go to the frontpage of Midas Oracle, or click on the InTrade tag.
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Here are the expired contracts about the Democratic vice presidential nominee (Joe Biden).
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Here is the expired contract about the Repuiblican vice presidential nominee (Sarah Palin).
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ORIGINAL POST:
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Unlike Bo Cowgill, I have stong reservations about those VP prediction markets. Read this WSJ post, for more.
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InTrade
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Democratic Vice President Nominee
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Republican Vice President Nominee
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BetFair
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Next Vice President:
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Democratic Vice President Nominee
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Republican Vice President Nominee
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NewsFutures
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Barack Obama will pick a woman as running mate.
© 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…- Intelligence in, intelligence out…-
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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Don’-t you love the Web? Within 15 minutes after my posting my absolute and definitive refusal to publish any bits about the VP prediction markets, I received a long rebuttal by Google’-s Bo Cowgill —-whose great prediction market paper is still for you to download (PDF file), by the way.
Okay, Okay, Okay.
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InTrade
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Democratic Vice President Nominee
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Republican Vice President Nominee
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BetFair
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Next Vice President:
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Democratic Vice President Nominee
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Republican Vice President Nominee
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NewsFutures
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Barack Obama will pick a woman as running mate.
© 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…- Intelligence in, intelligence out…-
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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In financial markets there is strong evidence to suggest that news gets priced into markets within 15 minutes of its release and sometimes even more quickly. Recent research into prediction markets suggests that they aren’t nearly as efficient with researchers from University of Pennsylvania showing that prices on IEM can be predicted using public news flow.
Doing a simple analysis of some the key events in the 2008 Presidential Elections against prices on Intrade shows that on discrete events there is a clear relationship between prices and news flow. However over longer periods the relationship is not always clear.
On the 4th of March CBS announced the results of a straw poll conducted at the conservative PAC convention in Washington DC. They picked Romney as their favourite. Romney’s price on Intrade lifted immediately where it stayed for about a week.
On the 11th of April the Fred Thompson revealed on Fox News and ABC Radio that he had been diagnosed with non-Hodgkin’s lymphoma nearly three years prior. The New York Times and other publications picked up the story the next day. Looking at his price chart shows he opened on the 12th of April at 19 but then closed at 15. The next day he opened at 11.2 but then closed at 17, as the story died down.
In both these cases, the news stories the media considered to be the important ones correspond with the news flow that traders thought was important.
However, the most interesting market movement of the year must be the Obama August slide. On the first of August Obama opened on Intrade at 35.5 but by the 24th of that month he had slide to 17.2. He continued sliding hitting a rock bottom of 10.7 on the 14th of October.
The question is what was the news flow on Obama from the 1st of August to the 24th of August? Analysing the news articles in the New York Times suggests a disconnect between what was reported and how the market was reacting. Obama started August badly with a bungled comment on use of nuclear weapons.
Additionally, his continued line that stabilisation of Iraq had been a ‘complete failure’ may also have cost him some points.
However in sum these news items don’t seem to correlate with an 18 point slide. This could lead us to two possible conclusions:
Cross-posted from the Hubdub blog.