Justin Wolfers gives his views about the (now past) differences between the probabilistic predictions given by InTrade on the 2008 US presidential elections…- and the ones generated by the other real-money and play-money prediction exchanges. One hypothesis: US political insiders can’-t access BetFair, legally, and thus can’-t arbitrage. (But they can trade legally on the Iowa Electronic Markets, NewsFutures, Inkling, and HubDub, one could retort.)
Emile Servan-Schreiber’-s hypothesis still holds.
Or else —-your own hypothesis is welcome.
P.S.: The latest news is that InTrade now gives Barack Obama slightly above John McCain.
To solve this complex puzzle one has to focus on the key factor – market efficiency.
Markets become efficient when traders become more experienced. For that to happen you need recurring events.
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To illustrate my point, in the early betfair days it was possible to make money bij selling England’s soccer team because there was a bias, despite huge liquidity. That has not been the case for many years. How many games did it take for people to detect this system, bet accordingly, and make the market efficient ? More than one…
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This political event is a first timer as far as prediction markets are concerned. So yes, there must be a bias present at intrade. Do betfair traders fall for the same “trap” ? Probably, albeit for a different reason – a sociocultural one.
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So why don’t we just take the average of the leading exchanges as a measurement of true value.
(.52 + .58)/2 = .55 to Obama.
That’s as close to the truth as you will get.
[…] Previously: About Justin Wolfers’s column […]
To solve this complex puzzle one has to focus on the key factor – market efficiency.
Markets become efficient when traders become more experienced. For that to happen you need recurring events.
–
To illustrate my point, in the early betfair days it was possible to make money bij selling England’s soccer team because there was a bias, despite huge liquidity. That has not been the case for many years. How many games did it take for people to detect this system, bet accordingly, and make the market efficient ? More than one…
–
This political event is a first timer as far as prediction markets are concerned. So yes, there must be a bias present at intrade. Do betfair traders fall for the same “trap” ? Probably, albeit for a different reason – a sociocultural one.
–
So why don’t we just take the average of the leading exchanges as a measurement of true value.
(.52 + .58)/2 = .55 to Obama.
That’s as close to the truth as you will get.
[…] Previously: About Justin Wolfers’s column […]