I have scanned and examined the UK Gambling Commission&#8217-s survey report on gambling and betting (PDF file), titled British Gambling Prevalence Survey 2007, and I have found out that there is a big problem in their list of gambling and betting activities. The problem is that survey respondents, who have been using a &#8217-spread-betting exchange&#8217-, were never been told specifically whether to select the &#8220-betting exchange&#8221- category or the &#8220-spread-betting&#8221- category. That should not be because there is big difference between a classic betting exchange (like BetFair, owned by The Sporting Exchange), which is regulated by the UK&#8217-s Gambling Commission, and a spread-betting exchange (like SpreadFair, owned by Cantor Fitzgerald), which is regulated by the U.K.&#8217-s Financial Services Authority (the equivalent of SEC + CFTC).

Indeed, spread bets (via a spread-betting bookmaker or via a spread-betting exchange) are high risk products, where the bettors/speculators need to deposit only a small percentage of the value of the bet. That is not the case with BetFair, which is a classic betting exchange. Here&#8217-s what is stated by BetFair:

Betfair do not offer credit facilities to our customers. Unlike some spread betting firms, we are not regulated by the Financial Services Authority in the UK. The reason that we do not offer credit is that the concept of the exchange relies on the fact that you must have the funds that you are staking in your account. When you place a bet, that money is secured by Betfair until the bet is settled and the funds paid out to the winner.

So the Gambling Commission survey report (cited like crazy by all the gregarious British media today) goes directly in my trash can. It&#8217-s a pity since we really need to know whether our beloved classic betting exchanges generate &#8220-problem gambling&#8221-. We can&#8217-t know that for sure reading this survey report, since they mixed up oranges and apples.

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WHAT THEIR SURVEY FORM READ:

11. Betting exchange – (This is where you lay or back bets against other people using a betting exchange. There is no bookmaker to determine the odds. This is sometimes called &#8216-peer to peer&#8217- betting.)

15. Spread-betting – (In spread-betting, you bet that the outcome of an event will be higher or lower than the bookmaker&#8217-s prediction. The amount you win or lose depends on how right or wrong you are.)

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HERE ARE THE GENERAL FINDINGS OF THE SURVEY REPORT:

What will be the change in US Federal Funds Rate at this month&#8217-s scheduled Federal Open Market Committee (FOMC) meeting?
FOMC – September FOMC
Current Rate 5.25% .
– 0.25

UPDATE: BetFair accurately predicted the direction of the interest rate change, but was too shy in its prediction of the amplitude of the interest rate change.

BetFair predicted: -0,25

The Fed decided: -0.50

That&#8217-s for the absolute accuracy. Now, what counts is the relative accuracy &#8212-the comparison between the prediction made by BetFair and the predictions made by the financial markets experts. I see that the rate cut of 50bp has come up as a big surprise to the Wall Street pundits. For example, here&#8217-s what Felix Salmon wrote this morning, before the Fed&#8217-s meeting taking place in the afternoon:

But my gut feeling is that Bernanke should announce a nominal 25bp cut in the Fed funds rate to 5% (hell, it averaged 5% in August anyway) along with a more substantial 50bp or even 75bp cut in the discount rate.

An interesting comparison would be Felix Salmon vs. BetFair over the next 10 years. I bet that BetFair will beat Felix Salmon and the other Wall Street pundits, over the long term.

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The Federal Reserve&#8217-s statement:

Release Date: September 18, 2007
For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman- Timothy F. Geithner, Vice Chairman- Charles L. Evans- Thomas M. Hoenig- Donald L. Kohn- Randall S. Kroszner- Frederic S. Mishkin- William Poole- Eric Rosengren- and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

UPDATE:

BetFair predicted: -0,25

The Fed decided: -0.50

And, now, how did the economists fare? (Bloomberg link via Niall O&#8217-Connor of Betting market, who has a comment.)

It was the first time in almost five years that the Fed move differed from analysts&#8217- predictions. The half-point reduction in the federal funds target was forecast by 23 of 134 economists surveyed by Bloomberg News. One hundred and five predicted a reduction of 25 basis points, while six forecast no change. A basis point is one-hundredth of a percentage point.

– BetFair&#8217-s probabilistic prediction: -0.25 @ 73%

– Bloomberg&#8217-s probabilistic prediction: -0.25 @ 78%

So, BetFair&#8217-s probabilistic prediction was close to Bloomberg&#8217-s one. Neither better, nor worse.

BetFair predicted: -0,25

The Fed decided: -0.50

That&#8217-s for the absolute accuracy. Now, what counts is the relative accuracy &#8212-the comparison between the prediction made by BetFair and the predictions made by the financial markets experts. I see that the rate cut of 50bp has come up as a big surprise to the Wall Street pundits. For example, here&#8217-s what Felix Salmon wrote this morning, before the Fed&#8217-s meeting taking place in the afternoon:

But my gut feeling is that Bernanke should announce a nominal 25bp cut in the Fed funds rate to 5% (hell, it averaged 5% in August anyway) along with a more substantial 50bp or even 75bp cut in the discount rate.

An interesting comparison would be Felix Salmon vs. BetFair over the next 10 years. I bet that BetFair will beat Felix Salmon and the other Wall Street pundits, over the long term.

&#8212-

The Federal Reserve&#8217-s statement:

Release Date: September 18, 2007
For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman- Timothy F. Geithner, Vice Chairman- Charles L. Evans- Thomas M. Hoenig- Donald L. Kohn- Randall S. Kroszner- Frederic S. Mishkin- William Poole- Eric Rosengren- and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

UPDATE:

BetFair predicted: -0,25

The Fed decided: -0.50

And, now, how did the economists fare? (Bloomberg link via Niall O&#8217-Connor of Betting market, who has a comment.)

It was the first time in almost five years that the Fed move differed from analysts&#8217- predictions. The half-point reduction in the federal funds target was forecast by 23 of 134 economists surveyed by Bloomberg News. One hundred and five predicted a reduction of 25 basis points, while six forecast no change. A basis point is one-hundredth of a percentage point.

– BetFair&#8217-s probabilistic prediction: -0.25 @ 73%

– Bloomberg&#8217-s probabilistic prediction: -0.25 @ 78%

So, BetFair&#8217-s probabilistic prediction was close to Bloomberg&#8217-s one. Neither better, nor worse.

The imagination market – by Christina Ann LaComb, Janet Arlie Barnett and Qimei Pan – 2007-03-10

Information markets [= prediction markets] are typically used as prediction tools, aggregating opinions about the likelihood of future events, or as preference indicators, identifying participants’ product preferences. However, the basic information market concept is more widely applicable. In our experiment, we utilized information markets [= prediction markets] within the domains of idea generation and group decisioning. Participants were allowed to propose ideas regarding potential technology research areas- these ideas were represented as securities on a virtual financial market. Participants were able to trade shares of technology ideas over the course of 3 weeks, resulting in the market identifying the “best” idea as the highest priced security. Our findings suggest that information markets [= prediction markets] for idea generation result in more ideas and more participants than traditional idea generation techniques- however, using markets to rank ideas may be no better than other methods of idea ranking. Additional benefits include providing immediate feedback, allowing visibility of all ideas to all contributors, and being a fun mechanism for consensus building.

Scroll down the whole story and judge by yourself, folks.

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New York Times:

“As he stated on Saturday, Senator Craig intends to resign on Sept. 30,” Mr. [Dan Whiting, a spokesman for Mr. Craig] said in a statement. “However, he is fighting these charges, and should he be cleared before then, he may, and I emphasize may, not resign.”

Aaaarrrrgh&#8230-

Slate Video – Senator Craig: The Re-enactment

Sen. Larry Craig plead guilty to disorderly conduct following his arrest for allegedly soliciting in a public restroom. Slate V delivers a re-enactment, based on the police report.

Minnesota Police report.

Bathroom Sex FAQ

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Yet another InTrade-TradeSports scandal??

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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.

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.

US Senator Larry Craig (on September 1, 2007 ):

Senator Craig Announces Intent to Resign from the Senate

BOISE, Idaho – Senator Craig made the following statement to Idaho:

First and foremost this morning, let me thank my family for being with me. We&#8217-re missing a son who&#8217-s working in McCall, and simply couldn&#8217-t make it down. But for my wife Suzanne and our daughter Shae, and Mike to be with me is very humbling.

To have the governor standing behind me, as he always has, is a tremendous strength for me. To have Bill Sali who has never wavered, and who has been there by phone call and by prayer, and his wife, is tremendously humbling.

For the leader of our party, Kirk Sullivan, to be standing here, who sought immediate counsel with me in this, is humbling. For Tom Luna—for any public official at this moment in time—to be standing with Larry Craig is a humbling experience. Learn more about Senator Craig&#8217-s top accomplishments

For most of my adult life, I had the privilege of serving the people of Idaho. I&#8217-m grateful for the opportunity they have given me. It has been a blessing. I am proud of my record and accomplishments, and equally proud of the wonderful and talented people with whom I have had the honor and the privilege to work and to serve.

I choose to serve because I love Idaho. What is best for Idaho has always been the focus of my efforts, and it is no different today. To Idahoans I represent, to my staff, my Senate colleagues, but most importantly, to my wife and my family, I apologize for what I have caused. I am deeply sorry.

I have little control over what people choose to believe, but clearly my name is important to me and my family is so very important also. Having said that, to pursue my legal options, as I continue to serve Idaho, would be an unwanted and unfair distraction of my job and for my Senate colleagues. These are serious times of war and of conflict—times that deserve the Senate&#8217-s and the full nation&#8217-s attention.

There are many challenges facing Idaho that I am currently involved in. And the people of Idaho deserve a senator who can devote 100 percent of his time and effort to the critical issues of our state and of our nation.

Therefore it is with sadness and deep regret that I announce that it is my intent to resign from the Senate, effective September 30. In doing so, I hope to allow a smooth and orderly transition of my loyal staff and for the person appointed to take my place at William E. Borah&#8217-s desk. I have full confidence that Governor Otter will appoint a successor who will serve Idaho with distinction.

I apologize to the people of our great state for being unable to serve out a term to which I have been elected. Few people have had the privilege and the pleasure to represent Idaho for as many years as I have. Each day, each week, each year brought new challenges and opportunities to create a better life for Idahoans. I have enjoyed every moment and cannot adequately put into words how much I appreciate what you have given me: the chance to work for this great state. I hope you do not regret the confidence you have placed in me over all of these years. I hope I have served you and our state to the best of my ability.

Lastly, Suzanne and I have been humbled beyond words by the tremendous outpouring of support we have received from our friends, our family, our staff and fellow Idahoans. We are profoundly and forever grateful. Thank you all very much.

US Senator Larry Craig announced his intent to resign, not his upcoming resignation (or effective resignation). Big difference. A resignation intent is not an upcoming/effective resignation. We know now, thanks to the New York Times, that there was an unstated conditionality &#8212-whether Larry Craig gets cleared before the 30th of September 2007. Thus, InTrade should not have expired the Larry Craig event derivative on the basis of that senatorial output. I bet that some traders will soon complain on the Intrade-TradeSports forum. They can contact me, if they wish.

More Info: – AP – MSNBC Video – Idaho Stateman –

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ADDENDUM:

Definitions of the word &#8220-intent&#8221- on the Web:

* purpose: an anticipated outcome that is intended or that guides your planned actions– &#8220-his intent was to provide a new translation&#8221– &#8220-good intentions are not enough&#8221– &#8220-it was created with the conscious aim of answering immediate needs&#8221– &#8220-he made no secret of his designs&#8221-
* the intended meaning of a communication
* captive: giving or marked by complete attention to- &#8220-that engrossed look or rapt delight&#8221– &#8220-then wrapped in dreams&#8221– &#8220-so intent on this fantastic&#8230-narrative that she hardly stirred&#8221– Walter de la Mare- &#8220-rapt with wonde
r&#8221– &#8220-wrapped in thought&#8221-
wordnet.princeton.edu/perl/webwn

* Intent in law is the planning and desire to perform an act.
en.wikipedia.org/wiki/Intent

* Reiki is an Intent driven system. Intent is the key to using the Reiki energy in healing and Attunements.
www.reikithehealingpath.com/reiki_glossary.htm

* Intent is the plan and will to act in a particular way or choice to remain inactive.
www.attorneykennugent.com/library/i.html

* The singlemost causal agency in all action, creation, destruction and change at all levels of existence. That component of consciousness which gives rise to all forms. The means by which the Will of God and Natural Law is manifest. The essence and source of motivation.
www.eoni.com/~visionquest/library/glossary.html

* Humans appear to be comprised of two important awarenesses: The Conscious Awareness (usually experienced through the personality) and a Greater Awareness. The Greater Awareness resides at body center and is connected to a fundamental force Seers call Intent. Intent is the equivalent of a muscle in the physical world. It is the means by which action, change, and expression happen in both the physical and energetic worlds for all humans. &#8230-
sentecenter.com/glossary.htm

* the mood, message, or meaning desired by the artist
www.learner.org/channel/workshops/artsineveryclassroom/p1popups/vocabulary.html

* A state of mind (mens rea) in which a person seeks a particular result through a particular course of action.
www.iejs.com/glossary/Glossary_I.htm

* the subtextual objective of a character
www.austin.cc.tx.us/sbramme2/Glossary.htm

* Voluntary function of a person’s mind in purposely performing a perceivable act.
www5.aaos.org/oko/vb/online_pubs/professional_liability/glossary.cfm

* requires that one intended to deprive the possessor &#8220-permanently&#8221- of the property. Although the mens rea of larceny is the intent to steal, the focus is on the loss to the possessor, not the gain to the defendant. Thus, even if the thief did not gain in the taking, if the possessor lost in the process. Courts have also held that permanence can be more than keeping forever. &#8230-
www.voyager.in/Larceny

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PARTING SHOT:

The problem with most of the socially valuable prediction markets (i.e., the non-sports prediction markets) is that all depends on:

– how well the event derivative contract is stated-

– how well the related information is interpreted-

– how well the event derivative contract is expired.

With the Larry Craig prediction market, we have yet another example that InTrade (which gets plenty of cites in Midas Oracle * and other business media outlets) might not have done its job with the highest degree of professionalism required &#8212-at least in my opinion. Judge by yourself, scanning all the facts presented above by yourself.

In the summer 2006, I denounced the North Korean Missile scandal, and here&#8217-s what followed:

– I received an e-mail from InTrade CEO John Delaney saying that I could put a prize of $10,000 in the &#8216-lost&#8217- column-

– I have been attacked by a second-tier phone-booth conference organizer, sponsored by InTrade-

– I received e-mailed insults from Ireland, sent on forged e-mail accounts.

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[*] 3,820 cites of InTrade, says Google Search.

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Next: Resignation Intent vs. Upcoming Resignation vs. Effective Resignation

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UPDATE: Chris Masse&#8217-s response to the Mike Giberson comment&#8230-

The real issue is not much that InTrade makes a mistake (we all do), but whether it acknowledges its mistake and compensates the victims. (In the North Korea Missile scandal, InTrade did not behave well in this perspective, according to my reading of the situation.) […]

US Senator Larry Craig simply said, “I’m thinking about resigning on September 30”. He did not say, “I’m resigning, effective September 30.” There is a huge difference between the two kinds of statement. And this difference (and InTrade’s error) pops up today because Larry Craig is exercising his constitutional right to change his intent. […]

Next: Donald Rumsfeld&#8217-s resignation letter – November 6, 2006

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UPDATE: New York Times&#8230-

Sen. Larry Craig has all but dropped any notion of trying to complete his term, and is focused on helping Idaho send a new senator to Washington within a few weeks, his top spokesman said Thursday. &#8221-The most likely scenario, by far, is that by October there will be a new senator from Idaho,&#8221- Craig spokesman Dan Whiting told the Associated Press. The only circumstances in which Craig might try to complete his term, Whiting said, would require a prompt overturning of his conviction for disorderly conduct in a men&#8217-s room at the Minneapolis airport, as well as Senate GOP leaders&#8217- agreement to restore Craig&#8217-s committee leaderships posts taken away this week. Those scenarios are unlikely, Whiting said.

Craig, a three-term Republican, met Wednesday with Idaho Gov. C.L. &#8221-Butch&#8221- Otter, R, to discuss a transition in which Otter would name his Senate replacement, Whiting said. Even if Craig were to complete his term, he said, the senator would not seek re-election in 2008. Whiting said Craig remains intent on clearing his name through the legal process in Minnesota and by having the Senate ethics committee address his claim that his misdemeanor conviction should not be a matter for action by the panel. […]

UPDATE: How US Senator Larry Craig managed to fool InTrade-TradeSports.

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

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-.)

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UPDATE: Craig hopes to redeem himself for future lucrative job as lobbyist.

Any good journalist writing up a piece on InTrade or interviewing John Delaney does mention the North Korea Missile scandal.

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Bet on It! – (page two – page three + a crappy listing of exchanges) – by Spectrum&#8217-s Steven Cherry

[…] Last year, a poorly worded contract by Tradesports caused a ruckus when some bettors lost money. Trade­sports had set up a market to predict whether North Korea would test a long-range ­missile—which was defined as sending a missile beyond the country’s airspace. Those who bought that contract, which expired on 31 July 2006, thought they had won when a North Korean missile flew 442 kilometers (275 miles) into the Sea of Japan (East Sea). However, the contract also specified that the source of the confirming information had to be the U.S. Department of Defense, which declined to release any specifics about the test. Despite a White House statement that confirmed the missile “went out about 275 miles,” Tradesports awarded the contract to those who bet against a successful test. […]

More Information:

Event derivative trader &#8220-Vancheeswaran&#8221-:

[…] Bryan Whitman ([email protected]) explicitly stated in print, in press conferences, and by email that North Korea fired multiple missiles into the Sea of Japan. For instance, “North Korea fired a long-range Taepodong-2 missile and six short- and medium-range Scud and Nodong missiles. All landed in the Sea of Japan without incident.”

National Security Advisor Stephen Hadley, in a press conference at the White House, stated that the missiles “went out about 275 miles” into the Sea of Japan.
http://www.whitehouse.gov/news/releases/2006/07/20060704-1.html

There are many other examples of the U.S. military and government (not just the press) confirming that the missiles were launched and approximately where they landed. […]

Makes him look like he is guilty of something, then.

Wall Street Journal + Portrait-Interview – The WSJ coverage of his resignation seems biased to me.

New York Times + NYT Editorial

I haven&#8217-t seen any Karl Rove prediction market at InTrade and NewsFutures. Am I correct?

UPDATE: NewsFutures was floating a Karl Rove event derivative&#8230- which turned out not to be predictive. Resignation prediction markets are rarely predictive, in my experience.

Karl Rove will resign from the White House.

UPDATE #2: Emile Servan-Schreiber&#8230-

Chris, how exactly do you define “predictive”? If your criterion is “last trading price above 50%”, that would betray a very limited understanding of the nature of both probability and binary markets. That’s a debate you and I have had ever since the first days of chrisfmasse.com a propos the 2004 US presidential election.

To your credit, I don’t think anyone has yet proposed a good way of assessing the “predictiveness” (predictivity?) of a single binary market after the fact. It is a very difficult question. Does anyone here have an answer?

#1. What I see on the NewsFutures chart above is that the probability of Karl Rove resigning went to about 20% previous to the official announcement in the WSJ, indicating that it was more likely than not that he&#8217-d stay at the White House. So, in terms of absolute accuracy, that particular prediction market failed.

#2. Emile-Servan-Schreiber is right that, scientifically, we should assess a series of identical prediction markets, not just one, if we want to determine whether this market-based technology has merit. (And we should assess them comparatively to competitive institutions&#8217- predictions.) Overall, the NewsFutures prediction exchange is indeed predictive.

NEXT: Does this prediction market chart look predictive to you? + Jed Christiansen strongly believes that Chris Masse has a bad understanding of probabilities.

Emile Servan-Schreiber&#8217-s blog post about the Dutch political elections and the NewsFutures prediction markets:

[…] At first glance, the quality of the market’s vote share predictions were somewhat disappointing compared to the three main polls […] However, the story changes dramatically if, instead of looking at the predictions just before the election, we consider the predictions several weeks earlier. Four to seven weeks before election day, the polls were much less reliable and the market clearly out-predicted them, individually and as a group. […]

This does not fly in my book. To be useful to us, the accuracy of the prediction should increase with time, not decrease.

UPDATE: Mike Giberson&#8230-

[…] Accuracy should improve in most cases as information improves, and generally we expect information about the near future to be better than information about the more distant future.

It is sort of fishy to, after the fact, go sorting back through the data to find “the” accurate prediction. Where is the theory? Better to take the missed predictions as real and try to understand them, rather than engage in after-the-fact data sifting to justify prior beliefs about the accuracy of PMs. […]

Koleman Strumpf on the Hillary Clinton prediction markets:

I think the market behavior since the original posting still could be consistent with no manipulation.

(1) At the time of my original post (Is there manipulation in the Hillary Clinton Intrade market?), Clinton’s conditional probability of getting nominated was 65%. It is now about 60%.

(2) Is there any news which might explain this drop? Sure– the market has decided that Obama is a much stronger contender for the nomination (and conversely Hillary is weaker). Namely, since the end of May, Hillary’s nomination contract fell from 51 to 43 and Obama has risen from 29 to 38. If the market thinks that the nomination is more unclear, then it is more likely there will be a protracted fight, and, even if Hillary gets the nod, she will be weaker and not be as likely to win the general contest.

Previous: Is there manipulation in the Hillary Clinton Intrade market? – by Koleman Strumpf + Win Justin’s Money? (re: Is there manipulation in the Hillary Clinton Intrade market? Redux.) – by Koleman Strumpf