Via Emile Servan-Schreiber of NewsFutures, John Auters in the Financial Times.
[…] This leads to [Justin Wolfers]‘- claim that [prediction markets] are the best way to aggregate information. This is true of any given amount of information. Take three economists and make them trade out a market over their predictions for next month’-s inflation number, he suggests, and they will arrive at a more accurate prediction than a poll of the same three economists. In a market, those with stronger conviction (or inside information) can express that conviction- those less confident will not be willing to stake money. […]
Prediction markets remain subject to the same weaknesses as other markets. The principle of “-garbage in, garbage out”- [*] applies. If there is only poor information to aggregate, they will be as wrong as everyone else. […]
It would make sense to incorporate these odds when making investments. […]
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Excellent.
(I don’-t get his micro slam against the wisdom of crowds. Anyway.)
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[*] As explained in the prediction market explainer published on the frontpage of Midas Oracle.
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There’s a lot of good stuff in there, although I don’t get the latter part where he talks about the GIGO principle.
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You don’t even need an economist, scientist or any other so-called “expert”.
There are ”normal” people out there who know or understand about things, based on knowledge, experience, insight etc. They could easily be more right than your average “expert”.
Example. Hopefully not a bad one. I know from experience how rapidly a political climate can change. This is what we could be witnessing in the US and in the UK today. Expect the unexpected, although that doesn’t apply as a rule. People want change in the current environment. There’s a lot of psychology involved. And Clinton never had a chance IMO.
@Medemi: Traders aggregate information digested by the experts.
Chris,
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what is it you want to achieve with your Midas Oracle Project ?
Prediction market journalism at it’s best ? Provide a source of information, a service ?
Explain how momentum trading works, hand out winning strategies ?
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I don’t know…
There are people out there who would throw all that in the garbage can. People who can make money because they have superior knowledge. They collect their own data (or use the raw data available), analyze it themselves, use their own methods. To what degree their judgement will determine the price in an event, I don’t know. Depends on a number of factors.
@Medemi: See that stoy:
http://www.midasoracle.org/200…..ack-obama/
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I want to industrialize stories like this one. In a richer way:
– more news bits, more news links;
– charts with news markets;
– an explainer on prediction markets;
– a betting advice area, with statistical information.
ok. I think you’ve detected a void that needs to be filled. Because people don’t understand the value of it. Good luck.