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UPDATE: Some smart comments, just below…-
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The McLaughlin Group of mid-June (yes, I know, that’-s last month):
MS. BERNARD: Well, here’-s what I think. I think the dirty little secret is Barack Obama probably already knows who he’-s going to select to be his vice presidential running mate. You put out the search committee, probably because Hillary Clinton was all over his back last week –-
DR. MCLAUGHLIN: So this is a smokescreen. This is a smokescreen.
MS. BERNARD: I don’-t know if it’-s a smokescreen, but I think he has a good idea who his vice presidential running mate is going to be. And the search committee is much ado about nothing.
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I told you so.
No good advanced, primary indicators.
Don’-t trade on VP prediction markets.
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BetFair is running markets on both who will be the next vice president and who will be nominated by the two parties.
As we’-ve discussed before in other contexts, one can divide two probabilities like these to obtain a conditional probability: e.g., if the Democrats put X on the ticket, they will win the general election Y% of the time (where Y = odds of X becoming VP/odds of X being nominated).
These markets are thin, so the conditional probabilities should be taken with a grain of salt. But they are interesting nonetheless:
The pattern I see here is that conditional probabilities are higher for fresh faces (Webb, Sebelius- and arguably Bayh and Richardson despite their longer tenure) than for the old guard (Clinton, Nunn, Biden).
Of course, these should be viewed as correlations, not necessarily causal effects. For example, two possible explanations are: 1) putting a fresh face on the ticket helps Obama, either because there is less baggage or less of a contrast in national-politics resume length, or 2) Obama will only pick an old guard candidate in the state of the world in which he needs to shore up a weakness (i.e., picking Clinton to end a civil war, or Nunn to add foreign policy experience).
On the GOP side:
Huckabee has the highest conditional probability, and Pawlenty and Jindal are noticeably lower. Interpreting this one is harder: it depends on what aspect of Huckabee one thinks the market is expecting to be appealing (religion, likeability, Southernness, selective economic populism).
Technical note: the bids and asks reported above are actual quotes scrapped this AM- the mids are (bid+ask)/2, rescaled to add to 100 across all candidates.
Reason, a libertarian periodical, writes that the Bob Barr effect is “-confirmed.”- Because Obama’-s campaign manager says it is.
Yes, pathetically a pro-market publication heeds the remarks of a political operative rather than markets that say Bob Barr will not make an impact.
Admittedly we have very little signal from prediction markets and lots of noise from political operatives, so writing about the latter makes for easier journalism.
There are now Intrade contracts on Barr’-s share of the popular vote. Perhaps they’-ll provide a little more signal, but I don’-t have high hopes for reasonable trading volume —- or for libertarian politicos embracing markets when the message of market prices might not correspond to their hallucinations.
Via mister Bo Cowgill
The New Republic
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Some British betting bloggers are completely out of the loop. 
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UPDATE: Andrew Sullivan on Hillary Clinton’-s exit statement. (He liked it.)
UPDATE: InTrade forum thread.
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InTrade
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Democratic Vice President Nominee
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Republican Vice President Nominee
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BetFair
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Next Vice President:
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Democratic Ticket
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Democratic Vice President Nominee
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Republican Vice President Nominee
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NewsFutures
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Barack Obama will pick a woman as running mate.
© NewsFutures
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Explainer On Prediction Markets
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Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-
A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.
Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.
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– My first warning: June 4. + My second warning: June 4, later that day. + My third warning: June 5.
– Now, spot the timeline in the event derivative chart below.
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Take that, Mike R.
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TAKEAWAY: If you are a UK-based or British trader on prediction markets, don’-t believe a single word of what UK-based or British bloggers say about US politics. Go to US-based or American blogs to get the information you need to inform your US bets.
If you followed that British blogger, you’-d be in the red today.
Get your information from sources close to the action —-not one ocean away.
Get your information from vibrant sources who use intelligently both the information technology and the wisdom of crowds to comprehend the news —-see my point #5 on yesterday’-s post.
Pay attention to what I’-m going to say in the coming weeks about “-prediction market journalism“-. Thanks.
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Dick Morris:
It would be an act of terminal insanity for Barack Obama to name Hillary Clinton as his vice presidential candidate. […] Finally, having Hillary in the West Wing would be a nightmare.
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Dick Morris:
Instead of conceding defeat and campaigning for Obama, auditioning for the spot of loyal teammate, Hillary insists on keeping her options open and vies for the spotlight with Obama, exactly what you do not want a vice president to do. […]
But the more serious problem is the public record that Todd Purdum, an excellent journalist, laid out in his Vanity Fair piece. Bill’s relationships with billionaires, his pursuit of financial gain, his alliance with the emir of Dubai, and his acceptance of speaking fees and income from some of the least savory of types is not what you need to carry around with you in a presidential race. […]
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More Info: See Andrew Sullivan…- who views Hillary Clinton as a detestable lady…-
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So, stay away from the “-Hillary Clinton As VP”- prediction markets…-
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The topic of this post is:
Betting &- Information
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#1. Don’-t trade on the VP predictions markets.
I have stong reservations about those VP prediction markets. Only 2 men in the world know what is going to happen: Barack Obama, and John McCain.
You can’-t divine their final thoughts.
Politicians often lie about their intentions —-they also change mind, frequently.
The decision to name one VP nominee could be made in secret —-without any early warnings.
Surprise is a card that Barack Obama and John McCain could play. Don’-t bet against their final will.
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#2. Don’-t believe in “-vice presidential selection committees”-.
Last time, in 2000, a man named Dick Cheney was appointed to head George W. Bush’-s vice presidential selection committee.
He was supposed to scout around to find and assess good candidates.
Surprise, surprise, that fake committee ended up putting Dick Cheney on the Republican ticket —-and the rest is history (Iraq war, etc.).
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#3. Don’-t bet on Hillary Clinton as VP.
She does not have the slightest chance.
It’-s highly unlikely that Barack Obama selects her on the Democratic ticket.
Hillary Clinton as VP nominee (and as VP) would present many quasi insurmountable problems.
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#4. Don’-t listen to betting bloggers who tell you that Hillary Clinton has a chance to be on the Democratic ticket.
They are clueless.
Don’-t read clueless people. They are a waste of time.
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#5. Select well your primary, advanced indicators.
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#6. Choose your bets (and trades) carefully.
Just because an event derivative is cheap doesn’-t mean that it’-s a good bet.
Don’-t pluck down money on a bet unless you’-ve seriously researched the topic by yourself —-and possesses some expertise or experience in that field.
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FOLLOW-UP POST: 2 days after my ringing the alarm bell… THE FREE FALL
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InTrade
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Democratic Vice President Nominee
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Republican Vice President Nominee
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BetFair
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Next Vice President:
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Democratic Ticket
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Democratic Vice President Nominee
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Republican Vice President Nominee
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NewsFutures
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Barack Obama will pick a woman as running mate.
© NewsFutures
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Explainer On Prediction Markets
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Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-
A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.
Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.
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Wouarf.
He will lose his bet.
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UPDATE:
– To be kept updated on the prediction markets, go to the frontpage of Midas Oracle, or click on the InTrade tag.
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Here are the expired contracts about the Democratic vice presidential nominee (Joe Biden).
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Here is the expired contract about the Repuiblican vice presidential nominee (Sarah Palin).
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ORIGINAL POST:
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Unlike Bo Cowgill, I have stong reservations about those VP prediction markets. Read this WSJ post, for more.
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InTrade
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Democratic Vice President Nominee
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Republican Vice President Nominee
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BetFair
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Next Vice President:
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Democratic Vice President Nominee
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Republican Vice President Nominee
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NewsFutures
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Barack Obama will pick a woman as running mate.
© NewsFutures
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Explainer On Prediction Markets
–
Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-
A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.
Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.
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