Category Archives: Analysis (Data)

The definitive proof that its presently impossible to practice prediction market journalism with BetFair.

Posted on by
Reply

No Gravatar

Homer's brain
–
Unlike InTrade and NewsFutures, BetFair does not deliver any chart after that the prediction market has expired &#8212-leaving the blog post that linked to it totally blank (in a digital world where old content is King, and where Google sends traffic to old blog posts).

The BetFair marketing department is staffed by arrogant incompetents who are incapable of establishing a working relationship with prediction market bloggers like me.

There is nothing more important for our industry than the uprising of new blogs that would hot-link to the charts of prediction markets. The BetFair marketing team hasn&#8217-t computed that yet, in spite of all efforts made in their direction.

Of all the prediction market firms I talk with, BetFair is the most impermeable to the prediction market approach: their degree of arrogance is inversely proportional to their level of competency.

–

US Masters 2008 prediction markets

In a Google search of five keywords or phrases representing the top five news stories of 2007, weblogs will rank higher than the New York Times Web site.

Posted on by
Reply

No Gravatar

The blogs won the bet.

In a Google search of five keywords or phrases representing the top five news stories of 2007, weblogs will rank higher than the New York Times&#8217- Web site.

The bet has been expired on the &#8220-YES&#8221- side. Dave Winer (representing the bloggers) won &#8212-and Martin Nisenholtz (representing the New York Times &#8212-at the time, in 2002) lost.

Long Bet 2

We decided that a weblog had to be something that would have been recognized as a blog in [2002]. This includes ad supported blogs and commercial blogs like those of the NY Times. While the bettors argument in this case discusses why non-commercial content will beat out commercial content, Winer never provides a definition of a weblog. As it turns out, including major news source blogs like those of the NY Times or sources like Wikipedia do not affect the ultimate outcome in the case of this bet, but they certainly could have.

Hummm&#8230- How come Long Bets could have let people register a not-so-well-defined bet? Long Bets does not seem to be a serious organization to me.

As for what it all means: The blogging software packages are better content management systems than the other, older CMS packages. The blogging software and their specific usage (free access, content parcelisation, dates and keywords inserted in the URLs, peer linking, open comments, etc.) fit better in the Google super system.

Psstt&#8230- One idea for the prediction exchanges like NewsFutures or InTrade would be to open prediction markets on Long Bets topics just weeks before the expiration dates. The event derivative contracts would say that the expiry judge is Long Bets. Emile Servan-Schreiber and Michael Giberson, any thought? :-D

External Link: TechCrunch on what is a blog.

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

Posted on by
3

No Gravatar

Latest update on the BetFair blog fiasco

&#8212-

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

&#8212-

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.

&#8212-

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.

&#8212-

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

&#8212-

The Michigan primary as seen thru the BetFair prediction markets

Posted on by
Reply

No Gravatar

Thanks to Michael Robb from BetFair, I can show you the charts of the last day of trading on Michigan&#8217-s election day. You can see, on the Republican chart, Mitt Romney (in red) as the Comeback Kid &#8212-starting at 3:00PM EST (that&#8217-s 8:00 PM, British time, on the chart).

Rep Michigan BetFair

Dem Michigan BetFair

Here is the full, historical, compound chart that I already published:

Michigan BeFair

Is that the Michigan primary, really? Bizarre.There is something I don&#8217-t get. Compare with the InTrade charts.

Fat fingers at BetFair? Did they mess with the legend? Or is this compound chart about another primary? (Which one, then??) Bizarre, bizarre.

&#8212-

TAKEAWAY ABOUT THE BETFAIR BLOG FIASCO:

  1. It looks bad for the BetFair blog editor, who pasted that compound chart on top of professor Leighton Vaughan-Williams&#8217-s story. One week later, it is still impossible for me to comprehend what that compound chart is supposed to represent, and what it is doing on that page. Big mystery.
  2. It is a shame that the BetFair blog hasn&#8217-t published an update note stating that that compound chart was pasted there by the editor (behind prof LVW&#8217-s back) and explaining what the writer meant by &#8220-betting markets&#8221-. Still a puzzle.
  3. 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.
  4. And, by the way, how come professor Leighton Vaughan-Williams&#8217-s posts are always excluded from the general BetFair blog feed? Is that a technical glitch? Or is it by design? Bizarre.
  5. The BetFair blog is not a serious publication. Period. I wonder whether I should link again to it, in the future. Probably not.

&#8212-

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

Compound chart - BetFair blog fiasco

&#8212-

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

The Michigan primary as seen thru the prism of the InTrade prediction markets

Posted on by
Reply

No Gravatar

Michigan, U.S.A. &#8212- Tuesday, January 15, 2008

&#8212-

The Democrats

The Hillary Clinton event derivative was expired to 100.

MI Dem Clinton

MI Dem Obama

MI Dem Edwards

MI Dem Field

&#8212-

The Republicans

The Mitt Romney event derivative was expired to 100.

MI Rep Romney

MI Rep McCain

MI Rep Giuliani

MI Rep Field

Source: InTrade

The prediction markets deserve a fair trial.

Posted on by
Reply

No Gravatar

Niall O&#8217-Connor:

Sadly, from our analysis, the impression that one gets is of a market that is spooked by poll results– driven by stale news- and heavily influenced by gossip and rumour.

Questions:

  1. Could Lord O&#8217-Connor cite the name of a more accurate forecasting tool?
  2. Could Lord O&#8217-Connor publish his own track record at predicting the US and British elections?
  3. Could Lord O&#8217-Connor give one example of an infallible human institution?
  4. Could Lord O&#8217-Connor state publicly whether he believes in knowing the future in advance with 100% accuracy? (If yes, then I&#8217-ll suggest to the CIA to hire him to get Bin Laden.)

Previously: Prediction markets are forecasting tools of convenience that feed on advanced indicators.

Electability of Hillary Clinton according to InTrade-TradeSports = 65%

Posted on by
2

Eddy Elfenbein at Crossing Wall Street:

I written about this topic before but one of the things I find fascinating about finance is how you can use markets for two items to create an “implied market” for a third. This idea is at the root of all the complex financial instruments that caused problems for so many hedge funds recently.

I’ll give you a good example. At InTrade.com, the site where you can trade futures on real world events, you can buy contracts on which candidate will win his or her party’s nomination [*] next year. There’s a separate contract for which candidate will win the presidency [**].

Let&#8217-s break out some math, shall we?

If you divide the latter [**] by the former [*], you get an “electability” contract. For example, according to recent prices, Rudy Giuliani has a 41.5% chance (I&#8217-m using the last price) of getting the GOP nomination and an 18.4% of winning the presidency. Soooo&#8230- the market believes that if he gets the nomination, he has a 44.34% chance of winning (18.4% [**] divided by 41.5% [*]).

(The only minor flaw is that could include a candidate winning but not getting the nomination, however, I’m content with dismissing that possibility as beyond remote.)

What’s interesting is electability in the general election can have little impact on how well a candidate does in the primaries. Some people, myself included, think that Ronald Reagan would have had a better chance of beating Jimmy Carter in 1976 instead of Gerald Ford, even though Ford beat Reagan for the nomination.

I should add that I don’t place a great deal of faith in these real world futures markets. I simply see them as fun games to enjoy, but not to take too seriously. Also, the markets aren’t very liquid. A minor change could have a big impact on the smaller-priced contracts.

Having said that, here’s a look at some candidates and the market’s take on their electability (sorry Paulites and Edwards fan, your candidates were too low to get a useful meaure).

Candidate………To Get Nomination….To Win&#8230-&#8230-&#8230-&#8230-Electability
Hillary&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-..59.5&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-.39.0&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-65.55
Obama&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-33.0&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-.17.2&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-52.12
Giuliani&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-41.5&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-.18.4&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-44.34
Huckabee&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-..18.6&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-7.2&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-38.71
Romney&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-..18.8&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-5.9&#8230-&#8230-&#8230-&#8230-&#8230-&#8230-31.38

Author Profile&nbsp-Editor and Publisher of Midas Oracle .ORG .NET .COM &#8212- Chris Masse&#8217-s mugshot &#8212- Contact Chris Masse &#8212- Chris Masse&#8217-s LinkedIn profile &#8212- Chris Masse&#8217-s FaceBook profile &#8212- Chris Masse&#8217-s Google profile &#8212- Sophia-Antipolis, France, E.U. Read more from this author&#8230-

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

  • Comments are now completely open on Midas Oracle.
  • Albert Einstein, Chairman of the Midas Oracle Advisory Board
  • Erratic –but not Stochastic– Charts
  • Barack Obama is the 44th US president.
  • We already have prediction markets in future tax rates. It’s called the municipal bond yield curve.
  • DELEGATES AND SUPERDELEGATES ACCOUNTANCY
  • O’Reilly – Money-Tech Conference

Reading the Markets – Forecasting Prediction Markets By News Content Analysis

Posted on by
1

Reading the Markets – Forecasting Prediction Markets By News Content Analysis – (PDF file) – by Ari Gilder and Kevin Lerman – 2007-xx-xx

Abstract

We present a system for predicting price fluctuations in Prediction Markets, such as TradeSports and the Iowa Electronic Markets. Our approach utilizes both market history and public news articles, published before the beginning of trading each day, to produce a set of recommended investment actions. Since there is evidence that prediction markets are very good indicators of future events, we hypothesize that the converse is true: past/present events can potentially assist in predicting future prices in these markets. We empirically show that these markets are surprisingly predictable, even by purely market-historical techniques. Furthermore, analyzing relevant news articles captures information independent of the market’s history, and combining the two methods significantly improves results. Capturing this signal from news articles requires some linguistic sophistication – the standard naive bag-of-words approach does not yield predictive features. Instead, we use part-of-speech tagging, dependency parsing and semantic role labeling to generate features that improve system accuracy.

We evaluate our system on eight political markets from 2004 and show that we can make effective investment decisions based on our system’s predictions, whose profits greatly exceed those generated by a baseline system. Additionally, our market prediction system can be applied to any Prediction Market with a known end date and for which a set of relevant entities (people, places, or things) can be defined.

Previously: Today&#8217-s prediction markets are far from being efficient.

Author Profile&nbsp-Editor and Publisher of Midas Oracle .ORG .NET .COM &#8212- Chris Masse&#8217-s mugshot &#8212- Contact Chris Masse &#8212- Chris Masse&#8217-s LinkedIn profile &#8212- Chris Masse&#8217-s FaceBook profile &#8212- Chris Masse&#8217-s Google profile &#8212- Sophia-Antipolis, France, E.U. Read more from this author&#8230-

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

  • Car manufacturer Renault (Nissan’s twin) is now a NewsFutures client.
  • Nokia’s Enterprise Prediction Markets = Competitive Advantage
  • Comments are now completely open on Midas Oracle.
  • Albert Einstein, Chairman of the Midas Oracle Advisory Board
  • Erratic –but not Stochastic– Charts
  • Barack Obama is the 44th US president.
  • We already have prediction markets in future tax rates. It’s called the municipal bond yield curve.

Justin Wolfers dreams of a prediction market land, where exchange odds are cited but not the polls.

Posted on by
4

No Gravatar

Knowledge @ Wharton (on polls):

The Power of Prediction Markets

The rapidly changing landscape of responders and related technology factors are two reasons why Justin Wolfers, Wharton professor of business and public policy, believes in the power of prediction, or betting, markets. Wolfers &#8212- who is associated with several prediction market sites such as InTrade.com or Tradesports.com [*], where participants buy and sell contracts on sports and potential political outcomes &#8212- argues that prediction markets are a more reliable outcome predictor than polls, for three reasons.

&#8220-First, by forcing you to &#8216-put your money where your mouth is,&#8217- they yield truthful revelation of beliefs,&#8221- Wolfers notes in a paper on pricing political risks with prediction markets. &#8220-Second, markets provide profit opportunities for those willing to gather new information that helps predict the future. And third, markets aggregate information dispersed across many traders.&#8221-

&#8220-You are not asking who they will vote for, but who they think will win,&#8221- says Wolfers. &#8220-The evidence is overwhelming that prediction markets provide a more accurate prediction than polls. On average, the final forecast from a Gallup poll is within about 2.25 percentage points, and the average for prediction markets is 1.5 percentage points.&#8221-

He points out that &#8220-the idea of betting on presidential elections is not new at all. Betting on elections has been going on for the last 100 years. If you read The New York Times from the turn of the century [**], they will report what is in the prediction markets &#8212- called &#8216-betting markets&#8217- back then &#8212- and not polls, which hadn&#8217-t yet been invented. But since 1940, the elections have been dominated by polls.&#8221-

Wolfers predicts that &#8220-within a few years and a couple of election cycles, we will be back to tracking political markets through the lens of prediction markets instead of polls. [***] In fact, in the last few election cycles, we have seen political commentators talking more and more about the race in light of prediction markets.&#8221-

[*] What kind of association is it? I take it that it is an informal association. I have never seen anything written on the InTrade-TradeSports sites.

[**] Thanks to Paul Rhode and Koleman Strumpf. PDF file

[***] I would be more prudent. I&#8217-d say that more and more commentators will follow the prediction markets, but the polls will remain the dominant barometer.

&#8212-

UPDATE: Emile Servan-Schreiber (NewsFutures CEO) comments&#8230-

1) The traders themselves are the first to look at the polls to inform their trades. So the polls are here to stay.

2) Our recent experience in Western Europe seems to indicate that the superior accuracy of markets over polls when predicting elections may be a U.S. artifact that isn&#8217-t so easily reproducible elsewhere. I&#8217-ve discussed this with Forrest Nelson of IEM [Iowa Electronic Markets], and apparently, ever since the Truman-Dewey polling debacle of 1948, U.S. pollsters have adopted a policy of reporting mostly raw numbers rather than projections based on sophisticated secret formulas, so they can&#8217-t be accused of manipulating opinion. However, raw numbers are notoriously unreliable when based on small samples, and Western European pollsters never report them, preferring instead to publish projections based on historically-informed statistical formulas. What we&#8217-ve observed in France and Holland is that it it&#8217-s very hard to beat the accuracy of such projections.

InTrade-TradeSports should have expired the Larry Craig event derivative today, on October 4, 2007, and not on September 5, 2007.

Posted on by
Reply

No Gravatar

US Senator Larry Craig - Mugshot

InTrade-TradeSports should have expired the Larry Craig event derivative today, on October 4, 2007, and not on September 5, 2007. That&#8217-s their main error. Last September, they expired this event derivative on the basis on Larry Craig stating his &#8220-intent to resign&#8221- &#8212-which is different than to announce an upcoming or effective resignation. Larry Craig later changed his &#8220-intent&#8221- &#8212-he then intended to stay in the US Senate (providing he would be able to withdraw his guilty plea). Unfortunately, today, a judge ruled against his attempt to dismiss his guilty plea. So, US Senator Larry Craig is announcing today that:

  1. He is not resigning from the US Senate-
  2. He will not seek re-election for his US Senate seat.

The condition #2 is sufficient to expire the December 2007 Larry Craig contract on the &#8220-yes&#8221- side. (&#8221-Yes&#8221-, he is announcing his &#8220-intention not to run in 2008&#8243-.)

&#8212-

ADDENDUM: The original InTrade contract

Sen. Larry Craig to announce resignation or intention not to run in 2008 on/before 31 Dec 2007 – This event derivative has been expired by InTrade on September 5, 2007.

Larry Craig Resignation - InTrade Dec 2007

The rules (= the event derivative contract statement):

This contract will settle (expire) at 100 ($10.00) if Senator Larry Craig announces his resignation from the Senate or announces he will not run for re-election in 2008 on or before 11:59:59pm ET on the date specified in the contract.

The contract will settle (expire) at 0 ($0.00) if this does not happen on or before 11:59:59pm ET on the date specified in the contract.

A resignation does not have to result in the actual departure by the contract expiry date but rather the announcement of the resignation must be made before the date and time specified in the contract.

Expiry will be based on official, public announcements made by Larry Craig as reported by three independent and reliable media sources.

Due to the nature of this contract please also see Contract Rule 1.7 Unforeseen Circumstances.

The Exchange reserves the right to invoke Contract Rule 1.8 (Time Protection) if deemed appropriate.

Any changes to the result after the contract has expired will not be taken into account – Exchange Rule 1.4

Please contact the exchange by emailing [email protected] if you have any questions regarding this contract before you place a trade.

Important:
Please contact the Exchange if you have any query or uncertainty (including how it may be settled) about this Contract, the Rule above or the Contract Rules before you trade.