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Previously: About Justin Wolfers’-s column
Justin Wolfers’- Freakonomics post (which suggests that BetFair would have a better predictive power if US traders could use it).
Justin Wolfers gives his views about the (now past) differences between the probabilistic predictions given by InTrade on the 2008 US presidential elections…- and the ones generated by the other real-money and play-money prediction exchanges. One hypothesis: US political insiders can’-t access BetFair, legally, and thus can’-t arbitrage. (But they can trade legally on the Iowa Electronic Markets, NewsFutures, Inkling, and HubDub, one could retort.)
Emile Servan-Schreiber’-s hypothesis still holds.
Or else —-your own hypothesis is welcome.
P.S.: The latest news is that InTrade now gives Barack Obama slightly above John McCain.
Via David Pennock of Odd Head fame
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Gary Becker:
[…] I believe that online political prediction markets, and other online prediction markets as well, should be legal in the United States and elsewhere, even if the amounts bet were quite large. There is no important substantive difference between such online betting markets and the Chicago Mercantile Exchange and other exchanges that allow individuals and organizations to take positions on movements of stock indexes, housing price indexes, and prices of other derivatives. A distinction is sometimes made between political betting markets and derivative markets since participants in derivative markets may be hedging other risks that they face. Yet this distinction has little substance since if larger bets were allowed in online political markets, groups whose welfare depended greatly on political outcomes would make greater use of these markets. For example, if a Republican presidential win would mean greater spending on military weapons, companies in the arms business might hedge their risks by betting on Barack Obama.
If large bets were allowed, some wealthy groups may bet a lot on their candidates in order to exert bandwagon influences on public opinion through their large bets affecting market odds. If so, these markets likely would become less reliable as predictors of outcomes, and hence would have less influence on opinions. To a large extent, therefore, these markets would be self correcting, although online political markets might place various other restrictions on bets, as is common in derivative and other exchanges.
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Richard Posner:
[…] There is an interesting question whether prediction markets should be thought of as “-gambling” and perhaps prohibited. As a matter of policy, that would be a mistake, even if one thinks that gambling should be prohibited. The prediction markets are markets for speculation, rather than for game-playing or risk-taking. Slot machines, card-playing, roulette wheels, and other conventional forms of gambling do not generate socially valuable information. Speculation does. Commercial speculation serves to hedge commercial risks and bring prices into closer phase with value. Political, cultural, etc. prediction markets also yield socially valuable information. The outcome of elections is important to companies and even individuals for whom particular public policies are important- they may wish to make adjustments to avert or exploit looming political change. Politicians too need to have as sharp a sense as possible about the effects on the electorate of their and their opponents’- strategies. Apparently they can get more accurate information from the prediction markets than from the public opinion pollsters.
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A list of the Betfair forum threads about the new premium charges.
A FaceBook group has been created to protest the new BetFair premium charges.
PREVIOUSLY: BetFair impose new “-Premium Charges”-…- Do BetFair gag the critics, too?
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A list of the Betfair forum threads about the new premium charges.
A FaceBook group has been created to protest the new BetFair premium charges.
PREVIOUSLY: BetFair impose new “-Premium Charges”-…- Do BetFair gag the critics, too?
As I write this, Intrade gives the advantage to McCain over Obama and has the Republican party even with the Democratic party to win the election, whereas all the other prediction markets, meaning IEM, Betfair, and the NewsFutures play-money kind still favor a Democrat in the White House. That disconnect prompted Chris to wonder aloud whether Intrade is faster than the other markets to incorporate the latest polls, perhaps because of its “-bigger liquidity”-.
That’-s an interesting reaction on several levels.
First, reactivity and accuracy are not to be confused for one another. Given that market prices are supposed to be more accurate and more stable that fickle U.S. raw polls (Berg et al, 2008), one should not necessarily be impressed by the market that is quickest to mirror the latest polls. I very much doubt that traders in the “-other”- markets have not heard about the latest polls giving McCain an edge. Rightly or wrongly – it is too soon to tell – they just gave those polls less weight that the Intrade traders apparently did.
Second, the argument from “-bigger liquidity”- is not receivable. Recently, Paul Tetlock analyzed Tradesports data in depth and found that more liquidity may in fact make the market dumber. He concludes: “-In both sports and financial prediction markets, the calibration of prices to event probabilities does not improve with increases in liquidity- and the forecasting resolution of market prices actually worsens with increases in liquidity.”-
My personal theory is that Intrade has a hair-trigger Republican bias which is not found in the other markets, because Intrade appeals to, and is marketed to, the more Republican-leaning segments of the U.S. population. In my opinion, the Intrade/Tradesports Republican bias was already evident in the 2004 election, as this analysis shows.
Of course, I may be completely wrong. In any case, I find today’-s dual disconnect between the polls and most of the markets, on the one hand, and between Intrade and the other markets, on the other hand, to be two very interesting data points that should be duly recorded so we can come back to them later, with hindsight.
I have re-published yesterday’-s BetFair Q &- A at the bottom of my previous post —-because that’-s the post that Google features, bringing in 300 people a day.
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My analysis of this PR debacle:
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A FaceBook group has been created to protest the new BetFair premium charges.
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Here are some BetFair traders’- takes:
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UPDATE:
A list of the Betfair forum threads about the new premium charges.
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The Independent
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PREVIOUSLY: BetFair impose new “-Premium Charges”-…- Do BetFair gag the critics, too?
UPDATE: They announce a Q&-A.
PREVIOUSLY: BetFair impose new “Premium Charges”… Do BetFair gag the critics, too?
UPDATE: They announce a Q&A.
