
Was Intrade being manipulated over the last month? - randomwalker
http://www.overcomingbias.com/2012/11/was-intrade-being-manipulated-over-the-last-month.html
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hooande
The author brings up some good points about the potential for arbitrage
between prediction markets. But in my experience, intrade has a strong
conservative bias. This is more likely a case of people betting on their
(incorrect) political convictions as opposed to intentional manipulation.

I remember observing a similar thing around the betting on the supreme court
healthcare decision. The odds were 3-4 points more against the legislation on
intrade than they were on other sites. The comments were overwhelmingly
partisan and conservative. "The Supreme Court will find this unconstitutional
because Obama is a socialist."

The idea behind prediction markets is that people will only bet when they know
something that the rest of us don't. But we shouldn't underestimate the human
ability to convince ourselves that everyone else feels as strongly about an
issue as we do.

~~~
CamperBob2
In addition to what you're saying, it could have made sense to buy Obama
calls, so to speak, if you think your taxes are going to go up significantly
under his second term. That behavior would severely distort Intrade's purpose
as a prediction market.

~~~
javert
No, it wouldn't. The "purpose" of a prediction market is to let people buy and
sell shares in a certain outcome, not to provide information.

That's just a nice side effect of a sufficiently liquid market.

~~~
CamperBob2
True, I really should have said it would distort Intrade's _utility_ as a
prediction market.

~~~
javert
It doesn't distort its utility for the people who are hedging (on the one
side) or speculating (on the other), and those are the actual clients of the
prediction market.

But it does make it less useful for third party observers :)

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Dn_Ab
My friend and I also did some 'arbitrage', we almost didn't do it because we
were sure we had something wrong, I mean, aren't markets supposed to be
efficient? We even made a program that calculated optimal amounts and alerted
us when the odds were aligned to a particular criteria taking into account
exctraction fees, exchange rates, commission and stuff.

Our only explanation was that betfair (our other side) was mostly European
while Intrade was mostly American so it is possible that lots of Intrade
betters were buying into the media's attempt to try to make the race a lot
closer than it was while the Europeans were not so biased. I don't know but it
is a simpler explanation than someone purposely losing money because they
think influencing a prediction market would affect the actual outcome?

~~~
javert
_aren't markets supposed to be efficient_

To a certain extent. Largely because of people doing arbitrage. So, if all
arbitrageurs called it quits because they thought markets are automatically
efficient, well, they wouldn't be.

Did you make much money?

~~~
zecho
There's an economics joke as old as the hills:

An economist and a non-economist are walking down the street when the non-
economist notices something on the ground and says, "hey there's a $10 bill!"
The economist replies, "Impossible. If there was a $10 bill on the ground,
someone would have picked it up already."

~~~
pja
On my summer holiday this year I was walking along Hadrian's Wall & looked
down to see a £5 note being blown along the path by the wind. Picked it up &
was instantly reminded of this joke :)

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cypherpunks01
A commenter over there mentioned that a similar phenomenon was noticed during
the 2008 presidential election, and quoted John Delaney (Intrade founder, now
deceased):

 _Mr. Delaney conceded there had been erratic behavior - including spikes in
the direction of Mr. McCain and away from Barack Obama "by up to 10 points."
And he said "trading that caused the unusual price movements and discrepancies
was principally due to a single 'institutional' member on Intrade."

But, after interviewing members of the institution involved and tracking its
trades, Mr. Delaney wrote in an e-mail message on Saturday: "I do not believe
based on our investigations and over seven years' experience in such matters
that the trading on Intrade was designed or motivated to artificially inflate
McCain’s chance of winning."_

<http://www.nytimes.com/2008/10/20/business/20predict.html>

~~~
andrewcooke
could this be hedging against a romney win? for example, if you're an investor
in green tech, then intrader shares in romney would be a way to protect
yourself.

but i imagine the numbers are too small?

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gojomo
Over betting markets as a whole, it's hard to distinguish 'manipulation' from
simple 'overconfidence' by a certain side.

The difference between InTrade and Betfair over long periods is the large
mystery... though given the lags/fees in getting money in, and the fact the
markets aren't that large -- so maximum profits aren't very high -- seem
likely to be part of the answer.

There's a reasonable Robin-Hansonian-case to be made that attempts at
prediction-market manipulation improve market accuracy over the long term, by
increasing the rewards to those taking sides against the manipulator.

------
pg
I've been wondering about this for week. Is there a statistical smoking gun
anywhere?

~~~
jsdalton
One could look at the state-by-state markets in the weeks leading up and see
if the probability predicted differed greatly from the main market. It would
be far trickier to manipulate the markets state by state in such a way that
their probable outcomes aligned with the probable outcome of the national
markets.

I just looked at the InTrade state numbers from 11/2 (which I have on a
spreadsheet) and running a few dozen simulations I was getting Obama winning
about 80%. That's a pretty significant difference from where the national
numbers were on 11/2 (I think about 66% maybe?)

Of course, if they differ it might just be because the Intrade market is
imperfect, in which case it would represent a nice arbitrage strategy for the
next election...

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cypherpunks01
Nate Silver wrote about this twice:

[http://fivethirtyeight.blogs.nytimes.com/2012/11/06/live-
blo...](http://fivethirtyeight.blogs.nytimes.com/2012/11/06/live-blog-
the-2012-presidential-election/#differences-in-political-betting-markets-
persist)

[http://fivethirtyeight.blogs.nytimes.com/2012/10/24/oct-23-t...](http://fivethirtyeight.blogs.nytimes.com/2012/10/24/oct-23-the-
virtues-and-vices-of-election-prediction-markets/)

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colonel_panic
One Intrade commenter from London claimed he was set up to earn about $20,000
in arbitrage against Betfair. If you expect the manipulation to continue over
a period of time (which I certainly did, and wished I could register on other
betting sites), it's worth it to deposit larger sums of money with bank
transfers despite the wait.

At one point I wondered whether the manipulators were making large purchases
once per day and whether this could explain why the different betting sites
never came back in line with each other. In that case, a savvy arbitrageur
might take advantage of prices while they're at their widest differential, and
then wait to buy more the next day. I thought I saw a pattern like this going
for a few days in a row but it was gone by the time I felt confident enough to
trade around it.

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qq66
If a prediction market is famous enough to affect an election, it will
generally cost more than $1 million to manipulate. I doubt that voter turnout
would have increased if Intrade had predicted a Romney win -- too few
Americans know what Intrade even is.

~~~
bodyfour
I'm sure all political reporters know what Intrade is. If you were going to
spend money to move the market, those are the people you're most trying to
influence.

I'm still personally skeptical of the whole manipulation theory, however. It's
probably just a combination of too many conservatives buying with their heart
instead of their head, and too few active arbitrageurs taking them to the
cleaners.

