that Obama and McCain will be the winners tomorrow.
Previous blog posts by Caveat Bettor:
Cross posted from UsableMarkets
Back in April I started talking about how Prediction Markets will be part of many news organizations’- “-citizen-generated”- content strategy going forward.
To quote myself (which seems kind of a rude thing to do, doesn’-t it …-?):
It seems as if no self-respecting news organization can ignore the Web 2.0 movement these days. Many now have some sort of “-wisdom of the crowds”- style content, in addition to RSS feeds, blogs, and so on.
Midas Oracle has covered some of the new relationships that are developing. I recently talked about MarketWatch.
Expect more to happen …- and perhaps quickly, too.
That was nine months ago. Since then we’-ve seen the WSJ, the FT, Reuters, CNN, and others (perhaps everyone can think of a couple or three) begin to dabble in or seriously consider prediction markets. With Inkling and InTrade in the white label prediction market business, the barriers to setting one up are obviously low enough that a certain amount of me-too-ism can easily prevail.
But there is a risk, and those of us who care about the success of the prediction market industry shouldn’-t get too excited about these developments just yet.
First, it remains to be see whether these new prediction markets can attract significant numbers of users. The prediction market industry is already saturated with prediction markets and games. So, despite their powerful brands, I’-m not confident that the FT or the WSJ can attract large followings (although I’-d be happy to be wrong about that).
Ah ha, you may say, we don’-t need a lot of users to generate accurate predictions. The MSR, and automated market makers will help solve the problem. But the problem is not one of generating accurate predictions, but about generating page views. Newspapers (even online) are advertising driven. If you can’-t generate sufficient page views, and you’-re paying too much to manage the prediction market on your site, then it’-s vulnerable to being cut. In fact, I wouldn’-t be surprised if once this US election cycle is over that some of these markets fall away.
And, if the news organizations are really interested in the predictions for predictions sake, they can always simply use someone else’-s.
As always, thanks for listening.
~alex (UsableMarkets)
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.
(Cross posted from Oddhead Blog.)
I’-m happy to report the launch of the Yahoo! Election ‘-08 Political Dashboard. Using the dashboard, you can navigate through a wealth of election-related data, including prediction market data from intrade.com, polling data from Real Clear Politics, search buzz data from Yahoo!, and financial contributions data, regional demographic data, and historical voting records from AP. You can view the election landscape from the national level or dive in deeper to investigate trends state by state.
Yiling, Tej, Lance, and I played supporting roles among a cast that includes fantastic teams at Yahoo! News, UI/Design, Ops, Q&-A, and more.
We’-ve come a long way since 2006.
See also coverage from TechCrunch and the Yahoo! corporate blog.
Previous: From Chris “-Outrageous Spin”- Masse.
Gilder and Lerman hypothesised that past/present events can potentially assist in predicting future prices in prediction markets. They empirically revealed that prediction markets are surprisingly predictable, even by purely market-historical techniques.
Taking hold of the baton from Gilder and Lerma, Panos Ipeirotis and George Tziralis developed techniques for extracting news flow signals to see whether they can indeed be utilised to predict the future performance of markets on the InTrade prediction exchange. On the question of whether Hillary Clinton will be the Democratic Presidential Nominee in 2008, they noted-
Our sentiment index (in maroon) is close to 1 when we predict that the market will move higher, and it is close to 0 when we predict that the market will move down. Typically, it works pretty well for predicting long periods of price increases and declines. To put our money where our mouth is, the signal for the last few days shows that Hillary’-s market price will edge lower in the next few days/weeks.
Following on from this we looked at the Intrade prediction market and the Betfair markets on whether Hillary Clinton will be the Democratic Presidential Nominee in 2008, as of 10.45 GMT on December 3 2007. Whilst the Intrade market suggested that Clinton’-s probability of victory was 67%, the Betfair market gave a reading of 69%.
We returned to the Intrade prediction market and the Betfair market on whether Hillary Clinton will be the Democratic Presidential Nominee in 2008 at 08.45 GMT on December 7 2007.
Whilst the Intrade prediction market had previously suggested that Clinton’-s probability of victory was 67%, it was now suggesting that her probability of victory was 64%.
The Betfair market which had given a reading of 69% on Decmber 3 as regards her probability of winning the democratic nomination, was now suggesting that her probability of victory was only 50%.
It is quite clear, that the both sets of markets are responding to stale news, with Intrade significantly lagging behind Betfair, as regards its ability to aggregate all available news flow. Those that had sold Clinton on Betfair at 1.44 on December 3, on the back of Panos Ipeirotis and George Tziralis’- advice, are now sitting on a healthy profit. The claim that prediction markets are innefficient would seem to be gathering momentum…-. with the most likely cause being the fact that they are not liquid enough.
http://www.bettingmarket.com/predictionstale.htm
Mr Justice Forbes said today that Australian horse race expert Mr Murrihy in his witness statement had been critical of the riding in 13 of the races and that there was a prima facie case against the jockeys. However, he added:
Remarkably, it was only in cross-examination that the very significant limitations and shortcomings in the evidence he was able to give became clear.
In court, Mr Murrihy had said ‘-it was not incumbent that I verse myself in UK or other jurisdiction rules’-.
Mr Murrihy also said in evidence:
I have not said I was an expert in respect of UK races.
The judge said in his ruling today:
This is an extraordinary admission given that he was purporting to give evidence about 27 races run in the UK according to UK racing rules…-. In my opinion, that was tantamount to Mr Murrihy disqualifying himself in giving evidence in relation to the suspect races. In my opinion it is now clear that Mr Murrihy’-s evidence was subject to a number of significant limitations and shortcomings which were not evident from his witness statements and his evidence in chief. It is abundantly clear that his evidence fell far, far short of establishing a prima facie breach of UK racing rules. I have reached the conclusion that even if it was appropriate to admit Mr Murrihy’-s expert opinion, its probative value is so limited that very little value can be attached to it.
The judge said there was insufficient evidence on which a jury could conclude that the jockeys, and therefore all the defendants, were guilty.
The British Horseracing Authority said after the case:
The restrictions placed on the three jockeys involved in the proceedings expired at the conclusion of the proceedings. Kieren Fallon, who is licensed by the Irish Turf Club, is therefore able to ride in Great Britain, and Fergal Lynch and Darren Williams are able to re-apply for their jockey licences.
Fallon’-s spokesman immediately called for two inquiries into the case – one into the police testimony, the other into why the Crown Prosecution Service (CPS) proceeded with the trial. He estimated the trial cost taxpayers ?10m.
Fallon, 41, from County Clare, Ireland, and two other jockeys, Fergal Lynch and Darren Williams, were charged with conspiracy to defraud customers of Betfair, the world’-s biggest online gambling service. The former owner and racing syndicate director, Miles Rodgers, was also charged with conspiracy to defraud and with an offence under the Proceeds of Crime Act.
[External Link: BBC News]
Aiming at providing high-quality prediction markets services, both of unique elegance and zero learning curve, we plan to start deploying by going deep. And by deep we don’-t refer to techcrunch, or walmart (yet), but to the biggest active community of prediction markets experts, midas oracle.
So, we start by giving you, the most demanding audience for such a service, early access to first stress-test askmarkets and to email us your impressions, proposals and bugs you encountered (we bet there are still some hiding somewhere), before really going ‘-wild’-, ..em public. Just navigate to our homepage, enter your email and password ‘-midasoracle’- and the first 50 of you will get in (we’-ll also invite the latecomers later on).
Since Halloween, financial markets seem to be getting spooked again.
Larry Kudlow writes:
Until recently, I thought the Fed could stand pat at their December 11th meeting. However, I have completely changed my mind in light of the continuing credit market turbulence.
Kudlow notes that the spread between 30-day asset-backed commercial paper and U.S. Treasuries, which spiked up dramatically after August’-s liquidity events but subsequently eased back down, climbed back up during November to the neighborhood of its previous high.
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The same is true of the spread between the London interbank offered rate and Treasuries.
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One of the features of the initial financial turmoil on which I commented last August is that it seemed to be confined specifically to the financing of problematic securities, but was not showing up as a broader risk premium in something like the spread between Baa-rated corporate bonds and 10-year Treasuries. But the latter spread has made a significant move up over the last month, and now stands 80 basis points higher than in July.
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A sharp upward move in the Baa-Treasury spread is often associated with the early stages of an economic downturn, as the following longer-term perspective using monthly data illustrates:
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For what it’-s worth, bettors at Intrade also seem to believe that the risk of a U.S. recession during 2008 has crept up since mid-October.
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Cross-posted from Econbrowser.
The British Horseracing Authority has put a case to the Department of Culture, Media and Sport for a greater contribution from the betting industry in the 47th levy.
Seeking a levy of somewhere between ?135million and ?153million for 2008-09, compared with an estimated ?94m from the latest scheme, the BHA’-s document calls for the government to settle the levy on the basis of 15% of gross win on British horseracing.
The BHA also calls for betting exchanges to contribute to the levy on a new and equitable basis, stating that the contribution made by betting exchanges to the Levy should increase from the ?6m paid in 2006-07 to ?20m.
This figure would be achieved, they argue, through the imposition of a 1.25% Levy on the net profits of punters on betting exchanges, raising the possibility that Betfair et al, may be forced to increase their commission charges.
An insight into the contentious issue of how betting exchanges should be taxed, may be found here:
http://www.bettingmarket.com/tax.htm
External Link: The Guardian
The speakers’- presentations are now available in pdf format on the conference webpage,
http://people.ku.edu/~cigar/PMConf_2007.
I intend to keep this page in place, so feel free to bookmark it and use it as a resource.
Previous blog posts by Koleman Strumpf: