He is working at Google as “-a Strategic Partner Manager in the EMEA Reseller team”-.
Another proof that prediction markets don’-t put food on the table of their most ardent advocates.
Jed Christiansen is not dead.
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Tag Archives: prediction markets
Common pitfalls of enterprise prediction markets: participants who lack relevant information, too few participants, and too little trading.
InTrade CEO John Delaney refused to improve the fairness of the trading on his Ireland-based event derivative exchange.
InTrade —- US.GOVT.HEALTHPLAN.DEC09
One InTrade trader, in October 2009:
The four re-definitions that have (so far) been necessary during the 3-month life of the US.GOVT.HEALTHPLAN.DEC09 contracts have brought to my attention that Intrade, to the best of my knowledge, does nothing to notify members that contracts they own have been “-clarified”-. It may be coincidence that volume on this contract spiked upward on July 29, Septeber 5 &- 10, and October 9 following rule changes on July 28, September 4 &- 9 and October 9. I suspect, however, that some members were aware of the rule changes while others with open orders found out about them later. While avoiding such ambiguous contracts would be preferable, some system should be in place to ensure that the unexpected need to revise contract definitions does not provide certain members with an unintended advantage.
Among the possible changes that I feel would improve this situation are the following:
1) Post a notification in the “-News”- whenever existing contract definitions are changed.
2) Notify all members with current positions and/or orders in a given contract whenever rule changes are posted.
3) Halt trading for some period of time after each change to allow members equal opportunity to respond to these changes, rather than providing an advantage to anyone who might look back at the contract specs or read their email first, including anyone who might know to look for a change after requesting the clarification from Intrade.
4) Add an asterisk or other indicator beside the contract summary on the trading screen, so that members interested in that contract will know that the contract definition has been changed. Ideally, the date of this revision should be included.
5) Add whatever changes among the above are instituted to Rule 1.7.
Changes 1), 2) and 5) seem like common sense to me, but perhaps others will disagree. In any case, I look forward to other exchange members’- comments on all of these suggestions.
The same trader, in December 2009:
Well, six weeks have passed since Mr. Delaney’-s assurance that this issue would be addressed “-ASAP”-. Unless I have somehow missed being notified of the policy change , it seems clear that the status quo is fine by management.
All I can do to attempt to encourage Intrade to take seriously the ambiguities in certain contracts is:
1) liquidate all my positions in such contracts,
2) avoid trading any potentially ambiguous contracts,
3) attempt to warn other traders about contracts that may be potentially ambiguous.
In particular, I will certainly stay away from any contracts involving U.S. legislation.
I could instead try to anticipate specific improvements that would help minimize ambiguities. However, if Intrade management cannot be bothered to address this issue even in a broad way, I think that it would be counterproductive for me to apply the occasional Band-aid. Discouraging other traders from becoming entangled seems more productive.
Albert Einstein said, Besides intuition and knowledge, the only valuable thing is the set of probabilities from the prediction markets; the rest are details.
Paul Hewitt on Rajiv Sethi on Nate Silver on Robin Hanson on climate change prediction markets
Betting on Copenhagen
Emile Servan-Schreiber comments on a New York Times opinion piece:
The idea that betting could help us gain clarity on some controversial scientific questions has first been proposed by George Mason economics professor Robin Hanson in 1992 in a paper entitled “-Could Gambling Save Science”- and available online here: http://hanson.gmu.edu/gamble.html
The benefits of creating prediction markets about controversial climate-change issues in particular is further developed on Nate Silver’-s blog and in this presentation given at CalTech in 2004: http://us.newsfutures.com/home/environmentalFutures.html
Feedback trading in prediction markets
Robin Hanson is schooled about prediction market trading.
Our guest author to our Master Of All Universes:
Feedback trading just means the kind of momentum trading that is pervasive in traditional assets, again, less so in prediction markets. In the biastest experiment, traders were given formal “-clues”- about the settlement, but for many market participants, the best “-clue”- (even rationally, if lazy) is recent price action. Even if feedback trading was possible within the experiment, the outcome (manipulation attempts were corrected) suggests that it wasn’-t prevalent.
In this experiment, traders were given equal endowments of shares/currency…- i.e. initially had equal account sizes. Yes, there were an equal number of manipulators and non-manipulators, but they could not coordinate. Even if they were implicitly coordinating, this is not the same as a single large trader influencing the market. Yes, in the theory paper trading sizes were variable, but according to the same parameter for each trader. Maybe if there were a large supply of potential traders able to frictionlessly join the manipulated market, a manipulator’-s relatively deep pockets wouldn’-t matter.
On Prediction Markets for Climate Change
The prediction market links that Robin Hanson does not want you to read
The Robin Hanson manipulation papers make unrealistic assumptions, but its not like prediction markets are a bad idea…!!…
In terms of unrealistic assumptions in Robin Hanson’-s series of papers on manipulation, the major ones have been out there since at least 2004.
Despite some limited evidence, the insistence on traders needing to know the direction of manipulation isn’-t too compelling since the direction will be manifest insofar as the price is “-wrong.”- “-Noise trader”- is a politically loaded and misleading term. Misleading because it suggests that the mean effect will be zero, when in reality “-noise trading”- usually takes the form of feedback trading. Lack of feedback trading is a significant assumption in the Hanson manipulation papers. Fortunately, prediction markets have objective settlements at specified times, unlike traditional assets where the meaning of prices is open to interpretation, making them more prone to feedback trading and irrational booms and busts.
With prediction markets, conditions for manipulation are more favorable when the settlement is far off in time, and when there are subjective inputs to the settlement, e.g. in politics. A distant settlement simultaneously makes it less clear what the real price should be, and delays manipulator losses because there is less incentive to correct price. At the limit, a manipulator could introduce a price distortion when a contract is launched, only to reverse position for small liquidity-related loss immediately before settlement, thereby destroying the markets “-integral”- of error over time.
Another big assumption, also identified by Paul Hewitt, is that traders have equal account sizes. But maybe this isn’-t a huge problem if settlement is forthcoming, and maybe the issue could be mitigated with additional exchange disclosures, such as the standard deviation of position sizes in a given market. While this could discourage liquidity as large traders would become paranoid about their positions, it is essentially a “-soft”- position limit, and traders would be forewarned of one-sided markets (which could of course be the result of someone well-informed, but I –- the google-anonymous* writer –- would bet that more concentration comes with more error on average…- this can be tested by someone with the data, of course maintaining trader anonymity)
Even accounting for long-term settlement, feedback trading, semi-subjective settlements, and account size imbalances, it seems one would have to abide to an overly rigid tenet of “-do no harm”- to hold that prediction markets are, on net, a bad idea. (Do no harm is of course abhorrent to libertarians, and even doctors don’-t actually follow such a rule.) Moreover, some pathologies like political self-fulfilling prophecy will only happen if prediction markets have already demonstrated their value and have become more popular. But even if one believes in their long term success, single pathologies can damage one’-s reputation permanently…- if one plans to die at a reasonable age.
[*Given the political climate, many firms have issued directives to employees to not engage in even the slightest appearance of impropriety, which might include blogging on manipulation.]