Tag Archives: Barack Obama

Is InTrade being manipulated? Why does InTrade give a discounted probability for Barack Obama as US president?

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A quick link panorama.

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#1. Is InTrade being manipulated?

– Nate Silver shows that there are abrupt downward pressures on the Barack Obama event derivative, while we also see some abrupt upward pressures on the Hillary Clinton event derivative.

However, you can see by yourself that InTrade is resilient enough and does a great job of going back to normal [*], after just a few hours of trading:

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– At Portfolio, blogger Zubin Jelveh blows the incidents out of proportion.

– Professor Lance Fortnow has a more careful analysis and notes that the price of the Barack Obama bounces back quickly enough.

– Quick thought: Maybe the media should use an average of event derivate prices for the last 5 work days&#8230- so that the abrupt perturbations would be eliminated.

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[*] UPDATE:

Professor Eric Zitzewitz:

I’m not sure you can conclude from Silver’s graphs that the market goes “back to normal.” You can conclude that it moves back in the opposite direction of the impact those large trades. Back when the Hillary for President market looked like it was being manipulated, it appeared that the manipulator was both placing a large purchase and then placing limit orders to provide price support and slow down the reversion of the price.

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UPDATE: Are we witnessing manipulation attempts on the &#8220-Florida to vote Republican&#8221- prediction market at InTrade?

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#2. Why does InTrade give a discounted probability for Barack Obama as US president?

– As you remember, Emile Servan-Schreiber of NewsFutures believes that it&#8217-s a Republican conspiracy all over.

– Professor Justin Wolfers puts up an hypothesis: it&#8217-s legally impossible for US traders to arbitrage on BetFair.

– InTrade put up a crappy excuse: the industry is still too &#8220-young&#8221-. How lame. How stupid. The industry was younger in the previous elections, where arbitrage opportunities didn&#8217-t exist according to professors Justin Wolfers and Eric Zitzewitz (see their 2004 paper and their other publications).

– Blogger Zubin Jelveh swallows the InTrade P.R. line, and adds another crappy InTrade P.R. line: More arbitrage opportunities are being exposed in open air because much more observers are hunting down arbitrage opportunities in 2008 than in previous elections. That&#8217-s a second blatant cretinery, uncorrected by the Portfolio blogger. Re-read Justin Wolfers&#8217- blog post. Professor Justin Wolfers states that:

The current variation in price is larger than I have ever seen in my years of studying prediction markets. The forces of arbitrage that would typically eliminate these differences have been handicapped by the legal restrictions preventing U.S.-based traders from using overseas markets.

– Finally, professor Lance Fortnow says nothing about the arbitrage opportunities between InTrade and BetFair, but does offer some technical points about the issue of polls versus the prediction markets, centered around the question of state correlations. Read on.

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UPDATE: Eric Crampton (a Canadian exiled in New Zealand) says he has managed to turn a buck by arbitraging between InTrade and iPredict New Zealand. He also makes 2 theoretical points. Go read it.

UPDATE: Greg Mankiw just linked to Nate Silver.

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Is this a sign that the BetFair prediction exchange and the BetFair blog are not the best sources of information on the 2008 US presidential elections?

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Previously:

– the latest InTrade predictions

– Emile Servan-Schreiber&#8217-s post on market arbitrage

2008 US Elections Prediction: John McCain is now the favorite at InTrade, while all the other prediction exchanges still have Barack Obama ahead. Is InTrade quicker to incorporate the latest polls because of the bigger liquidity of its prediction markets?

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#1. 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&#8230- Intelligence in, intelligence out&#8230-

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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More Info:

– The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

– Prediction Market Science

– The Midas Oracle Explainers On Prediction Markets

– All The Midas Oracle Explainers On Prediction Markets

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#2. Probabilistic Predictions = Charts Of Prediction Markets

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Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

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2008 US Elections

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InTrade

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2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland = electoralmarkets.com

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– This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

Intrade 2008.PRES.McCAIN > PRESIDENT.REP2008

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How frequent are arbitrage opportunities such as the following?

In addition to title, the reverse is true of OBAMA/DEM.

Do traders really think there&#8217-s some probability of McCain being elected as an idependent and Obama being replaced as the Democrat nominee?

2008 US ELECTORAL MAP PREDICTION: The 2008 US elections thru the prism of the prediction markets – 2008 US presidential and congressional elections – US President Prediction + US Congress Prediction – Barack Obama vs. John McCain

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#1. 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&#8230- Intelligence in, intelligence out&#8230-

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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More Info:

– The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

– Prediction Market Science

– The Midas Oracle Explainers On Prediction Markets

– All The Midas Oracle Explainers On Prediction Markets

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#2. Probabilistic Predictions = Charts Of Prediction Markets

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Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

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InTrade

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2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland = electoralmarkets.com

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– This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

Quit mulling over the VP-choice prediction markets, todays real story is in the election winner markets.

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I would suggest that the VP selections and the performance of the VP-choice markets at InTrade and elsewhere lend some validity to Chris Masse&#8217-s views on such markets. But enough about the VP markets, already. The interesting developments are in the election-winner markets.

Price for 2008 Republican VP Nominee (others upon request)(expired at convention) at intrade.com

Since just after 2 PM Irish time, when the NEW.REP.VP.PALIN contract briefly fell into the 20s (rumors had it that Palin wasn&#8217-t on a plane to Dayton- subsequently established that the rumor was not true), the contract turned sharply up to about 98 and stayed there until the selection was made official.

During that same time period, the &#8220-Obama wins&#8221- contract has slipped down a few percentages and the &#8220-McCain wins&#8221- contract is up a few percentages. Since at most VP selections are typically expected to affect final vote totals by 2 or 3 percent, the fact that the Obama and McCain contracts (which are winner-take-all, not vote-share contracts) have moved by 2 or 3 percent themselves suggests the markets think Palin is a fairly strong choice.

(But as I write this, the Obama contract is rallying back. Live blogging the prediction markets is hazardous stuff.)

Price for 2008 Presidential Election Winner (Individual) at intrade.com

Price for 2008 Presidential Election Winner (Individual) at intrade.com

UPDATE: As of Tuesday morning, both presidential markets have slid back to their pre-Palin-announcement levels, but active trading suggests continued disagreement about the information trickling into the market. Also interesting, activity has continued on the NEW-REP-VP-PALIN contract, with the price dipping below 95 (but back to 97 as I write).  Since that contract expires at the convention – i.e. in a day or two – some folks are betting Palin will be off the ticket fast.

The vetting of the many potential Democratic vice president nominees was not as secretive as I thought. – Bo Cowgill was right, in hindsight.

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The New York Times has a recount on how Barack Obama reached his decision on Joe Biden. The final decision was probably made 10 days ago, while Barack Obama was vacationing in Hawaii.

[…] Mr. Obama’s decision had as much to do with Mr. Biden’s appeal among white working-class voters and compelling personal story, and his conclusion that the Delaware senator was &#8220-a worker.&#8221-

The important information in the NYT piece is that Barack Obama personally called governor Bill Richardson &#8220-late last week&#8221- to announce him that he was not considered anymore. That&#8217-s around the time the Joe Biden rumor began to have more weight in the media circles &#8212-see the InTrade chart below.

Bo Cowgill, back in May 2008 (when I started to act as a prophet of doom):

This is dumb. Cover them if something interesting happens. Maybe your theory will turn out to be wrong. Anyhow: Although the decision is made in secrecy, the Presidential nominees have a number incentives which we have plenty of information about. Specifically:
* They want someone who will balance their tickets in terms of geography, race and class.
* They want someone who will help with weak areas of their campaigns.
* They want someone who will be a good campaign surrogate — giving good speeches and attacking the opponents effectively.
* They want to avoid a VP who will de-motivate or offend the base.
* They want to avoid someone with a bunch of skeletons in the closet such as angry ex-wives, out-of-wedlock kids, etc.
* Etc etc.
Anyhow, I don’t see any reason to ignore these markets in case something interesting happens. I read Midas Oracle so that I don’t *have* to read a whole bunch of other websites!

Bo Cowgill was on the right track, now that I think of it &#8212-in a society where everything leaks out.

On the opposite of the spectrum, Tom Snee was too much extreme in his view:

According to Tom Snee of the Iowa Electronic Market, at Iowa University, futures markets need more hard information than they get in the veepstakes, to reliably predict a result.

Markets are very good at predicting elections, he says – but not choices being made inside Barack Obama&#8217-s or John McCain&#8217-s head.

Justin Wolfers was more measured.

So, Bo Cowgill and Justin Wolfers are the winners, on that one.

I was partially wrong. I am a bit too extreme, sometimes. (Did someone else notice that? :-D ) I need to learn more about&#8230- granularity.

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PS: On the Republican side, now&#8230-

Price for 2008 Republican VP Nominee (others upon request)(expired at convention) at intrade.com

Who will be the Republican Vice Presidential Nominee?

Barack Obama + Joe Biden – THE PREDICTION MARKETS NAILED IT… triple alas (for my reputation as a world-wide prediction market pundit, and for the debate on the different quality of the various primary indicators out there).

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“Friend &#8212- I have some important news that I want to make official. I’ve chosen Joe Biden to be my running mate.”

Some blogger says his wife is fantastic.

New York Times portrait of Joe Biden.

UPDATE: Barack Obama&#8217-s speech + Joe Biden&#8217-s speech

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I think it is the worst pick ever. What a blunder. Joe Biden (a D.C. insider) is unpopular and gaffe prone. Plus, that choice shows that Barack Obama is insecure when it comes to foreign policy. An emphasis on the economy and, thus, on a successful gubernatorial experience would have been better.

Kathleen Sebelius was the one to pick. She is my vice president. (And Ron Paul is my president. :-D )

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I have over-estimated the secretiveness of Barack Obama&#8217-s decision process. The chart above obviously shows that the Joe Biden narrative leaked out to reporters was beamed out for a purpose: testing the Obama-needs-a-VP-who-is-strong-in-foreign-policy argument, and letting the Press do the final vetting on gaffe-prone Joe Biden.

InTrade CEO John Delaney (along with the HubDub and BetFair people) will now brag on his marketing material that his prediction exchange did forecast Joe Biden as the Democratic vice president nominee.

What&#8217-s bad in all that (other than I have an egg on my face [*] ) is that we won&#8217-t have a public debate on the different quality of the various primary indicators, and how that conditions the accuracy of the prediction markets.

[*] I have an egg on my face, but Caveat Bettor has a whole omelet on his. :-D

Waiting for Barack Obamas choice for VP candidate

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– Lawsuit about the ineligibility of Barack Obama for the US presidency. &#8212- Not a hoax.

– Pranksters are sending false text messages. &#8211- Did Caveat Bettor fall in this trap?

– Texas Rep. Chet Edwards is the surprise just out of the hat.

While InTrade CEO John Delaney is deceiving the journalists to sell his wares, Tom Snee of the Iowa Electronic Markets is telling them the truth: BEWARE THE VP-CANDIDATE PREDICTION MARKETS, THEY JUST AGGREGATE RUMORS.

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BBC News:

According to Tom Snee of the Iowa Electronic Market, at Iowa University, futures markets need more hard information than they get in the veepstakes, to reliably predict a result.

Markets are very good at predicting elections, he says – but not choices being made inside Barack Obama&#8217-s or John McCain&#8217-s head.

Thank God for the BBC.

Thank God for the Iowa Electronic Markets.

Shame on John Delaney &#8212-over 3 generations of Delaneys.

Other than Tom Snee (the IEM spin doctor), Chris Masse and Justin Wolfers are the only prediction market analysts to have sent out warnings about the VP-candidate prediction markets.