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Prices as Probabilities in Election Markets – 2007 presentation by Lance Fortnow
Discussion continues here…-.
UPDATE: Follow up here.
Polls versus Prediction Markets – Lance Fortnow Edition
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Tag Archives: polls
The question that might well embarass David Pennock and Lance Fortnow
What is the usefulness of http://electoralmarkets.com/ as compared to the usefulness of http://www.electoral-vote.com/ ??
Answer attempts here.
NEXT: Polls versus Prediction Markets —- Lance Fortnow Edition
State Polls versus Electoral College Prediction Markets
Prediction market analyst Lance Fortnow in an e-mail to me:
Right now the electoral college markets are tracking the polls pretty closely. I think we’-ll see some divergence when we get close to the election since the polls can’-t keep up. In past elections the markets were much better than the polls within a few days before the election (though not on election day itself which has too many rumors).
Other thoughts:
– There is a long-shot bias —-states which are above 85% (for one candidate or the other) reflect a probability closer to 100%.
– The state markets are strongly correlated. There is a small but non-trivial chance that many states will be way off this year. And then people will be reluctant to trust the electoral college markets in the future.
So, I have (at least) one answer to my series of provocative questions: Electoral college prediction markets are more useful than the state polls towards the very end of the presidential campaign (but not on Election Day). Interesting. Thanks.
PS: The discussion about this post goes on in the comment area of another post.
Dont ask the experts. Ask the prediction markets. They know better.
I would rather say: Trust the experts, but do use an information aggregation mechanism to average their forecasts, so that you eliminate extreme forecasts.
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Ask Markets
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Why did prediction markets do well in the pre-polling era, professor Strumpf?
Previous blog posts by Chris F. Masse:
- The best research papers on prediction markets
- 2008 Electoral Map
- American Enterprise Institute’s Center For Regulatory And Market Studies (Policy Markets)
- IIF’s SIG on Prediction Markets
- Science
- Mozilla FireFox users, do you have trouble downloading academic papers (as PDF files) from SSRN?
- “Impact Matrix. Used to collect and gauge the likelihood and business impact of various events in the very long term.”
Predictify is about building track records of human predictors.
Robert Scoble interviews their CTO.
Video
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Predictify is not a prediction exchange. We think prediction markets are superior to polls and surveys, don’-t we? 
With Predictify, the mechanism delivering the collective verdict is simplistic: it’-s a poll —-with possibility to get down to each individual answer.
Their conversation is very interesting, nevertheless —-in great part due to Robert Scoble’-s intense curiosity.
Technically, the video is awesome and plays well —-even with my old computer and slow DSL line. Kudos to the Fast Company techies.
UPDATE: I don’-t like that their video starts off automatically, though. With YouTube, we decide to play the video —-it is not imposed on us.
UPDATE: Alas, their embedded video does not go into the blog feed. 
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UPDATE: I e-mailed my remarks to Robert Scoble, and he’-s asked to his techie to look into the issues.
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UPDATE: I see that the video does not start on its own, now. They managed to correct that. Rest the fact that their videos don’-t go into feeds.
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If you want to increase the absolute accuracy of the outputs of the prediction markets, try (if you can) to increase the quality of the inputs.
Wanna better political prediction markets? Ask Gallup to generate better polls —-because that’-s what traders eat for breakfast.
I have been telling that to Barry Ritholtz —-but he stays on his position.
Thanks to Barry for listening.
Let’-s move on to another polemique.
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Ubber finance blogger Barry Ritholtz believes in magic. He believes that, with more volumes on the event derivative markets, comes the Omniscience -capital O.
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Our good friend Barry Ritholtz.has persuaded himself that our real-money prediction markets suffer from an irremediable and fatal problem: liquidity on political event derivative markets is too thin for smart Wall Street people like him to take their market-generated probabilities seriously. Barry Ritholtz is keen to tout oranges–-apples comparisons: the NYSE volume versus the Obama–-Clinton volume at InTrade. It’-s a bullshit argument, but he managed to persuade some gullible journalists writing for some clueless mainstream media that thin liquidity was responsible for the New Hampshire upset —-and else.
Barry, if you had 1,000,000,000 trades on the New Hampshire prediction market, you’-d still have an inaccurate prediction. The polls were wrong, and there’-s nothing …- NOTHING…- that the InTrade and BetFair traders could have done to get this election right. Get over it, Barry. Traders are not magicians.
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[For why the polls were wrong, see: The New York Times, Zogby, Rasmussen, Gallup…]
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WISDOM IN CROWDS COMMENTS: Who cares about the accuracy of the prediction markets when the polls (or the exit polls) are giving us the primary information that is, a bit later, reflected in the prediction markets?
Final InTrade v. Zogby Showdown Results
Superdelegate chicanery notwithstanding, Obama has won his party’-s nomination, so my head-to-head contest between a major pollster (Zogby) and major prediction market (Intrade) will be coming to a close.
Unsurprising to those who know a little bit about the scholarship, economics, and/or track record of prediction markets, the traders of Intrade provided us much better data this election season than the respondents to the Zogby polls.
| Standings | |||||
| Wins | Losses | Ties | Pct | Contender | Avg Eve Prob |
| 7 | 3 | 11 | 59.5% | Intrade | 71.3% |
| 3 | 7 | 11 | 40.5% | Zogby | 40.7% |
| Schedule | ||||||||||
| Score | Date | State | Party | Intrade | Zogby | Winner | Intrade Pct | Zogby Pct | ||
| 7-3-11 | 6-May | IN | Dem | Clinton | 2-way-tie | Clinton | 85% | 42% | ||
| 6-3-11 | 6-May | NC | Dem | Obama | Obama | Obama | 90% | 50% | ||
| 6-3-10 | 22-Apr | PA | Dem | Clinton | Clinton | Clinton | 82% | 47% | ||
| 6-3-9 | 4-Mar | OH | Dem | Clinton | 2-way-tie | Clinton | 70% | 45% | ||
| 5-3-9 | 4-Mar | TX | Dem | Obama | 2-way-tie | Clinton | 57% | 44% | ||
| 5-2-9 | 5-Feb | NJ | Rep | McCain | McCain | McCain | 96% | 52% | ||
| 5-2-8 | 5-Feb | NJ | Dem | Clinton | 2-way-tie | Clinton | 67% | 43% | ||
| 4-2-8 | 5-Feb | NY | Rep | McCain | McCain | McCain | 98% | 53% | ||
| 4-2-7 | 5-Feb | GA | Dem | Obama | Obama | Obama | 96% | 48% | ||
| 4-2-6 | 5-Feb | MO | Dem | Obama | Obama | Obama | 63% | 47% | ||
| 4-2-5 | 5-Feb | CA | Rep | McCain | Romney | McCain | 56% | 40% | ||
| 3-2-5 | 5-Feb | CA | Dem | Obama | Obama | Clinton | 52% | 46% | ||
| 3-2-4 | 29-Jan | FL | Rep | McCain | 2-way-tie | McCain | 51% | 33% | ||
| 2-2-4 | 26-Jan | SC | Dem | Obama | Obama | Obama | 90% | 38% | ||
| 2-2-3 | 19-Jan | SC | Rep | McCain | McCain | McCain | 56% | 29% | ||
| 2-2-2 | 19-Jan | NV | Dem | Obama | Clinton | Clinton | 54% | 42% | ||
| 2-1-2 | 15-Jan | MI | Rep | McCain | 2-way tie | Romney | 54% | 27% | ||
| 2-0-2 | 8-Jan | NH | Dem | Obama | Obama | Clinton | 91% | 39% | ||
| 2-0-1 | 8-Jan | NH | Rep | McCain | McCain | McCain | 82% | 34% | ||
| 2-0-0 | 3-Jan | IA | Dem | Obama | 3-way tie | Obama | 54% | 28% | ||
| 1-0-0 | 3-Jan | IA | Rep | Huckabee | 2-way tie | Huckabee | 53% | 28% | ||
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Lord willing, I will have another showdown season, but will most likely choose another pollster. Whereas Intrade listed contracts and probabilities for every state primary, Zogby only provided election eve updates for only 21 of the 87 held to date. Rasmussen stands out as a worthy pollster, but I would be happy with any candidate referrals from my readers as well.
Cross-posted from Caveat Bettor.
Previous blog posts by Caveat Bettor:
- Land-Ocean year-to-date temperatures 0.35 Celsius over baseline
- Intrade lists Global Warming Contracts!
- Intrade beats Zogby on Super Tuesday
- Super Tuesday Showdown: Intrade v. Zogby
- The Democrat SC Showdown: Intrade v. Zogby
- Zogby beats Intrade in predicting Nevada caucus winner Clinton.
- The GOP SC and Dem NV Showdown: Intrade v. Zogby