Tag Archives: prediction market journalism

Barack Obama will finish off Hillary Clinton by June 15.

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The End

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Lawrence O&#8217-Donnell (a leftist journalist &#8211-but a good one, whom I appreciate):

A senior campaign official and Clinton confidante has told me that there will be a Democratic nominee by June 15. […] Yes, Clinton spokespersons publicly seem to be lost on gravity-free planet Clinton, but privately they know the end is near.

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There&#8217-s a quasi consensus among the political pundits to say that Hillary Clinton will not be the Democratic nominee in November 2008.

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Tim Russert:

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That was Wednesday night. I have just watched NBC Nightly News this Thursday, and the same Tim Russert appeared with 2 white boards full of calculations, which all pointed to Hillary Clinton being toasted.

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My general thoughts about the place of the political prediction markets in this primary election season:

  1. The weight of the political prediction markets in the US political scenery is close to epsilon. I have been monitoring Memeorandum (the Web&#8217-s best political news and opinion aggregator), and it has never featured one piece of political prediction market journalism &#8212-not only that, but none of the popular popular pieces, featured by Memeorandum, has ever mentioned the political prediction markets and their probabilities. The people who breathe politics on a daily basis (the experts and the bloggers) don&#8217-t give the first fig about the prediction markets. They couldn&#8217-t care less.
  2. The prediction market luminaries who predicted that the prediction markets were to become a tool used in political campaigns were dead wrong. I have never read that campaign staffers use actively the political prediction markets. Campaigns use private polls, only.
  3. Like in 2004 (when Howard Dean was crowned, early on), the prediction markets, at the start of the primary season, were incapable of foreseeing who would be each party&#8217-s nominee, ultimately &#8212-Barack Obama and John McCain both came out of the blue. But the polls and the political experts didn&#8217-t see them, too.
  4. Nothing surprising in that. While the idiots emphasize the supposed magical power of the prediction markets (using adjectives such as &#8220-fascinating&#8221- or &#8220-intriguing&#8221- when writing about them), the well informed people know for a fact that they simply aggregate information from the primary, advanced indicators and the opinions expressed by the political experts. Nothing more than that. The prediction markets are incapable of foretelling upsets, by essence.
  5. The last weeks were particularly interesting, in that regard, because the Obama-vs-Clinton polls have been of no interest &#8212-only the views of the political experts who could count in terms of delegates and super-delegates were of interest. The political prediction markets on the Democratic side, these last weeks, have been a reflection of the pundits&#8217- calculations.
  6. Outside of our blog, the only person who has aimed at practicing prediction market journalism is Justin Wolfers. He has understood the concept.
  7. I would have my own concept of prediction market journalism, and I don&#8217-t agree with the way he executes, but that&#8217-s a detail. The main thing is that he has gotten the concept. That&#8217-s what is important, and that&#8217-s what makes all the difference between Justin Wolfers and the HubDub bloggers (for instance). The concept. The concept. The concept. The idea is to center the narrative around the inputs given by the relevant prediction market(s) &#8212-not just gluing artificially news bits and a prediction market chart (or a link to a prediction market).
  8. InTrade, BetFair and NewsFutures are, in my view, the 3 prediction exchanges that matter for prediction market journalism &#8212-as of now.

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Now, the charts of the expired prediction markets &#8212-starting with Pennsylvania (of 2 weeks ago):

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Yesterday&#8217-s North Carolina:

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Yesterday&#8217-s Indiana:

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Sources: InTrade &amp- BetFair

(Go there for the remaining primaries and caucuses. I don&#8217-t put them on, here, because they don&#8217-t matter anymore.)

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Now, the charts of the prediction markets, going forward:

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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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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.

Ill make a $500 donation to the first think thank that makes an interesting, non-bogus use of real-money prediction markets before the end of 2007. Ill be the judge of bogosity and interestingness, but I can say that a paper about prediction markets counts as uninteresting.

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Mike,

My Good Lord,

Mike Linksvayer

Would prediction market journalism (that is, showing to the normal people on the street that prediction markets can help understand better baseball games, or whatever else, on top of being fun and pure) fit your criteria of non-bogosity and interestingness?

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Reporting prediction market probabilities

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David Pennock takes a sudden interest in prediction market journalism. Good. (Better late than never.)

My thoughts:

  1. Do report the probabilities, not the prices.
  2. Do not report spread info.
  3. Do report probabilities from the very top, most liquid prediction markets, only.

Michael Giberson and Jason Ruspini, what do you think?

BAD KARMA FOR PREDICTION MARKET JOURNALISM: Almost nodoby has linked to Justin Wolfers articles at the Wall Street Journal.

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Considering that he is the #2 researcher in our field, that he issued bold statements on the use of market-generated predictions by journalists (&#8221-2020&#8243-), that the WSJ is the premier business publication, then that&#8217-s bad omen for prediction market journalism &#8212-well, at least, for the version that he has put out. The feedback of the Blogosphere is clear: WE COULDN&#8217-T CARE LESS.
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JW + WSJ
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The Marketing Of The Reading Of The Public Prediction Markets = What Robin Hanson has deep trouble with, and what the prediction exchanges (e.g., InTrade-TradeSports, BetFair-TradeFair) havent fully computed yet

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Robin Hanson on &#8220-silly&#8221- research topics:

[M]ost people think futarchy (government by [prediction] markets) is silly, even though most think it has a decent chance of performing well […].

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Decision markets and decision-aid markets are 2 great concepts pushed by Robin Hanson, the world&#8217-s #1 researcher in the field of prediction markets. But they are just inventions, not innovations. What is important is to find out which population segment or which class of business executives find this stuff productive and helpful.

In that perspective, his presidential prediction markets at InTrade are good ideas, and the liquidity there (helped by an AMM) is decent enough. But they are just betting supports, right now. I haven&#8217-t seen any opinion leaders taking them as a trusted source of information, which is the damn goal. We will see whether that comes true in the future.

If Robin Hanson were really serious in finding a killer app for his concept of decision-aid markets, he would of course come up with conditional prediction markets in the realm of sports, which is the most popular topic in the real-money prediction markets. Alas, I often have the impression that the academics in the field of prediction markets have profound disdain for sports prediction markets.

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Robin Hanson on seeking decision advice:

[…] We rarely seek out advice, and when we do it is usually on much smaller decisions. […] One reason we avoid getting advice is that it lowers our status relative to those who give advice. Of course this is also makes asking for advice a good way to flatter and supplicate. Not sure if this explains the puzzle though. But all this doesn&#8217-t seem to bode well for fielding decision markets on the biggest organizational decisions.

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Allow me to digress from there. I think that the reading from the prediction markets is like an advice &#8212-in that you have to accept the market message as an authority. If you are an expert with direct access to primary sources of information, I don&#8217-t think you&#8217-d rely on the message from the public prediction markets (which are information aggregation laggards). The big mistake from Robin Hanson and the others has been to sell the public prediction markets as tools for the decision makers. That could happen, but marginally, I believe. Experts and decision makers will firstly want to rely on their primary sources of information and on their analysis.

I think that the population segment which is the more likely to appreciate the consumption of market-generated probabilities would be composed of people who want a chopper view of world events. Prediction market journalism should satisfy this dashboard need.

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[Please note that the thoughts expressed above refer to the public prediction markets (as stated in the post title –think BetFair-TradeFair, InTrade-TradeSports, Betdaq, HubDub, NewsFutures, and Hollywood Stock Exchange) —not the enterprise prediction markets, which is a horse of another color.]

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Robin Hanson on decision-aid markets:

I don&#8217-t recall ever turning down a chance to consult on prediction markets for a Fortune-500 company. If you know of an opportunity that I&#8217-m missing, do let me know.

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Doc, are there more Fortune-500 executives and managers attending a conference on extra-terrestrials or a conference on finance? :-D

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Re-read Mikes testimony slowly, and then youll get which consumers need(s) prediction market journalism should fulfill.

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Mike Linksvayer:

Small comforts of prediction markets

Mike Linksvayer &#8212- November 19th, 2007

Yesterday I had dinner with a friend I hadn’t seen for a few years. I asked what he’d been doing, apart from being a nerd, and he said he’d been spending too much time following the U.S. presidential campaigns (actually just the Ron Paul campaign, but that’s not particularly relevant here). I realized that I don’t do this anymore. It could be because I’m maturing, but I’ll give credit to prediction markets.

Most of the yapping in the media is about the horse race and personalities, which I don’t care about, other than the status of the former. Instead I check prices at Intrade most days, which gives me a more accurate and much more concise status update than any amount of time spent reading or watching commentary.

Furthermore, betting that candidates I detest will win and against candidates I mind less, even in small amounts, really helps me not waste time thinking (mostly distressed thoughts) about the election.

So thank you prediction markets for the time and peace of mind!

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Mike&#8217-s post is the most important piece of wisdom ever published about the prediction markets since the creation of the Iowa Electronic Markets in 1988.

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Hence, I propose that the meager but smiling Mike Linksvayer be made the mascot of the prediction markets.

Mike Linksvayer

Mike Linksvayer&#8217-s profile at Midas Oracle

Chris Masse is a total and complete fake -thats what Niall OConnor seems to think.

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Niall, my good Lord,

Firstly, thanks for your constant scrutiny of my web activities. I&#8217-m so honored &#8212-and you should be too, because I&#8217-m one of your feed subscribers.

As you point out, that post was not an instance of &#8220-prediction market journalism&#8221- &#8212-and was never branded as such. I have made a long-time policy on all the Midas Oracle blogs that their content is not about prediction markets only. That post was about US politics, and it consisted in a link to a story explaining why Oprah Winfrey is not able to help Barack Obama, because of demos and else. I thought my readers would like to read that story.

Niall, if you want an instance of &#8220-prediction market journalism&#8221- (not in its richest form, though, as we are just started experimenting and researching it), try that &#8212-and you&#8217-re welcome to criticize it and improve it on your own blog&#8230- if you can. (And if you want material for your next damning critique, try that.)

Your impulse to eviscerate the field of prediction markets (most of the times, with phony arguments, and at other times, with valid arguments) should be kept in check with both science and common sense &#8212-or you risk losing your credibility totally.

Best regards, my good Lord.

Chris Masse

Read the previous blog posts by Chris F. Masse:

  • Never talk when you can nod, and never nod when you can wink, and never write an e-mail because it’s death. You’re giving prosecutors all the evidence we need.
  • Is Justin Wolfers a libertarian? Probably not.
  • The information technology that caught Eliot Spitzer
  • Eric Zitzewitz’s 10 minutes of fame
  • Fun with conditional probabilities
  • Wrongly Crafted Headlines Of The Day
  • an American, petite, very pretty brunette, 5 feet 5 inches, and 105 pounds

No blog reaction about Justin Wolfers prediction market piece in the WSJ.

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Yet.

That&#8217-s key to see whether his flavor of prediction market journalism (heavily based on a single technique called prediction market event study) can take off. As I said in yesterday&#8217-s blog post, even though his work is interesting, he is up against formidable competitors. Political analysts like Lawrence O&#8217-Donnell, Eleanor Clift, Mort Zuckerman, Pat Buchanan, Radley Blako, etc. &#8211-to name a few pundits (left and right)&#8211- produce riveting content. Can Justin Wolfers, as a political analyst using a prediction market analysis tool, break through this competitive pack? As of today, Justin Wolfers&#8217- journalistic work is artificially subsidized (so to speak), because the WSJ wants to launch and establish a play-money prediction sub-exchange. A step in the forward direction would be to see the big political blogs like InstaPundit or DailyKos stealing Justin Wolfers&#8217- method, and boosting their pageviews thanks to that. We will see. I&#8217-m not holding my breath.

The criteria that I would use to assess prediction market journalism are professional credibility, webpage popularity, the quantity and quality of the blog reactions, the amount of visitors sent to the discussed prediction market(s), and the number of journalists who ultimately embrace this method. See another criterion?

Read the previous blog posts by Chris. F. Masse:

  • Barack Obama’s victory in South Carolina won’t stop the Clintons.
  • eTech 2008 — Google’s enterprise prediction markets
  • Predictocracy = Market Mechanisms for Public and Private Decision Making
  • Prediction Market Management — Foresight Exchange vs. Inkling Markets & HubDub
  • Why you should launch your brand-new prediction exchange at a conference
  • Why Indian Software Outsourcing Companies are Outsourcing to China
  • Midas Oracle is the only popular, independent, exhaustive, multi-author, multi-exchange, Web-based resource on prediction markets.

Did the BetFair blog use trading data from InTrade to hint at BetFairs accuracy??

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Latest update on the BetFair blog fiasco

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I am alerted today that the BetFair blog has updated its infamous Michigan story with a new compound chart bearing a clearer label. It reads now:

Republican nomination – The race so far

I&#8217-ll have some comments, below the chart, but first a technical note. The new chart posted is a 527-KB BMP image. I have replaced it with a 32-KB JPG image. The BetFair blog is not run professionally. Any web publisher knows that images should be reduced to the max. That&#8217-s the ABC of web publishing. (And to add insult to injury, I noted previously the technical bizarrery that the two professor Leighton Vaughan-Williams&#8217-s stories never appeared in the BetFair blog feed.)

For you information, I have updated all my previous blog posts on the topic with an addendum re-publishing this new chart.

Compound chart - BetFair blog fiasco

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UPDATED ANALYSIS OF THE BETFAIR BLOG FIASCO:

  1. Professor Leighton Vaughan-Williams should have defined what he means by &#8220-betting markets&#8221-, in his story. In the past (see the addendum of that story), prof Leighton Vaughan-Williams used two types of cocktail &#8212-one including all betting markets (traditional bookmaker odds and exchange odds), one including only the BetFair odds. He should publish an addendum to his story defining exactly what he means by &#8220-betting markets&#8221-, this time.
  2. The BetFair blog editor should not have pasted a BetFair compound chart behind the writer&#8217-s back. It&#8217-s a big no-no in editing. Again, another proof (in a long list) that the Betfair blog is not run professionally.
  3. If a chart were to be inserted on top of LVW&#8217-s story (with his consent, we hope), it should have been the expired chart(s) of the Michigan primary, since that&#8217-s the heart of LVW&#8217-s story.
  4. The fact that the BetFair blog editor pasted (behind LVW&#8217-s back) a BetFair chart lead the readers (like Niall Or&#8217-Connor and me) to conclude that professor Leighton Vaughan-Williams means &#8220-the BetFair betting markets&#8221- when he writes about &#8220-the betting markets&#8221-. This is probably not the case, but nobody knows for sure &#8212-see my point #1 for the need of an explainer on this.
  5. Now, if professor Leighton Vaughan-Williams means &#8220-the BetFair betting market&#8221- (I assign a low probability on this scenario), then the story looks bad. The story is bullish on the fact that the Mitt Romney event derivative (for the Michigan primary) was predictive. The election-day chart that I published yesterday evening (and republished below) shows Mitt Romney being the favorite starting at 3:00 PM EST on election day&#8230- Kind of a stretch to claim victory for the BetFair betting markets. I&#8217-m still waiting for BetFair to send me the full, historical chart on the Michigan primary.
  6. BetFair should publish all expired charts &#8212-just like InTrade-TradeSports are doing. See my new page, re-publishing some important expired prediction market charts. That way, any controversy could be settled more quickly.
  7. With all due respect to him, it looks bad on professor Leighton Vaughan-Williams for giving his writings to a corporate blog where the publisher and editor&#8217-s names are not listed anywhere, and whose overall content quality is feeble &#8212-to say the least. Especially since we read the testimony of a furious Betair blog writer, who described the BetFair blog editor as anonymous, incompetent and tyrannical.
  8. Besides Niall O&#8217-Connor&#8217-s critical comments, professor Leighton Vaughan-Williams&#8217-s story on the BetFair blog has attracted a negative comment, calling his argument &#8220-questionable to say the least&#8220-, and asking (as I am doing on this current post) for more data to be published in an addendum.
  9. It looks bad on the BetFair management for publishing completely crappy stories like that. It damages the BetFair brand. I should tell my readers, though, that the BetFair-TradeFair managers (like Michel Robb, Tony Clare, Mark Davies, David Jack, Robin Marks, etc.) are highly professional, efficient, law-abiding, forward-looking, helpful, ethical, polite, and respectful. It is a real pity that the BetFair blog tarnishes BetFair&#8217-s reputation.
  10. Betair should focus on being a prediction market resource for journalists and bloggers. As of today, they still don&#8217-t provide on their website dynamic charts and expired charts.
  11. As I repeated many times on Midas Oracle, prediction market journalism is hard, complex and costly. It can&#8217-t be done by any living organism (hermaphrodite or not :-D ) simply equipped with a computer and an Internet connection.

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As an addendum, I re-publish here the election-day Michigan chart (on the Republican side). As I said, I&#8217-m still waiting for BetFair to send me the full, historical chart. You can see, on this Republican-side chart, Mitt Romney (in red) as the Comeback Kid &#8212-starting at 3:00PM EST on election day (that&#8217-s 8:00 PM, British time, on the chart).

Rep Michigan BetFair

For your information, here&#8217-s what professor Leighton Vaughan-Williams wrote. As I said, an explainer from him is needed to determine whether he means the &#8220-betting markets&#8221- in general (with, or without, BetFair included?) or the &#8220-BetFair betting markets&#8221-.

Professor Leighton Vaughan-Williams on the official BetFair blog:

[…] Those taking the same advice on Tuesday evening [2008-01-15 = date of the Michigan primary] were similarly well rewarded as well-backed Mitt Romney stormed into clear favouritism in the markets and a comfortable victory at the polls. After a blip in the New Hampshire Democratic primary the old certainties – that election favourites tend to win elections – was re-established.

As in the Republican New Hampshire primary, the polls and pundits had declared the race between Senator McCain and Governor Romney as a toss-up while the betting markets pointed to a comfortable victory in both cases for the eventual winners. Once again, in the battle of the polls, pundits and markets, the power of the betting markets to assimilate the collective knowledge and wisdom of the crowd had prevailed. […]

As for the InTrade &#8220-betting markets&#8221-, if that&#8217-s what professor Leighton Vaughan-Williams means (solely, or among others), they show a strong support for Mitt Romney in the last 2 days (which includes election day). Kind of a stretch to claim a victory for the &#8220-betting markets&#8221-. Also, it would be funny to have the (anynomized) InTrade data interpreted on the blog of another exchange (BetFair, a competitor of InTrade-TradeSports) to hint about the alleged strength and accuracy of the BetFair &#8220-betting markets&#8221-. That would be the last drop that breaks the water bucket. Another reason why professor Leighton Vaughan-Williams should come forward to explain what he means by &#8220-betting markets&#8221- in his story. Does he mean the &#8220-InTrade betting markets&#8221-???

(FYI, the Mitt Romney event derivative was expired to 100.)

MI Rep Romney

Psstt&#8230- Sounds like a vertical line is lacking on this chart&#8230- Look at the right end&#8230- Bizarre.

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NEXT: No more anonymized trading data, please. State your source(s).

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The BetFair blog is not a serious publication.

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I just got it that professor Leighton Vaughan-Williams&#8217-s story published on the official BetFair blog and the BetFair compound chart published on top of his story should be understood independently from each other, as the BetFair chart was pasted there by the BetFair blog editor.

(I have updated all my previous posts on the topic with the explainer above.)

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TAKEAWAY:

  1. Professor Leighton Vaughan-Williams talked about &#8220-betting markets&#8221- in his story. Those &#8220-betting markets&#8221- were not defined precisely on that page.
  2. The BetFair compound chart, pasted by the BetFair blog editor on top of Professor Leighton Vaughan-Williams&#8217- story, has lead readers (like the ultra-vigilant Niall O&#8217-Connor) to believe that &#8220-betting markets&#8221- meant the BetFair betting markets.
  3. It was probably not the case, in the writer&#8217-s mind. To be sure, though, an explainer should be issued by the BetFair blog.
  4. The BetFair blog editor has an omelette on his/her face.
  5. I told you many times that the Betfair blog is a piece of crap.
  6. A writer for this blog told us so, too.
  7. As I said many times, web journalism is not for anybody. It&#8217-s a specialty trade. It requires vertical skills. And, more precisely, prediction market journalism, in our digital times, is difficult and complex. It&#8217-s sad to see that the BetFair-TradeFair executives haven&#8217-t computed that.

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UPDATE: The BetFair blog has added a new label on the infamous compound chart&#8230-

Compound chart - BetFair blog fiasco

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NEXT: Did the BetFair blog use trading data from InTrade to hint at BetFair&#8217-s accuracy??