

Prediction markets on Obama's chance of winning nomination - mhb
http://www.intrade.com/

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mechanical_fish
Richard Feynman:

 _This question of trying to figure out whether a book is good or bad by
looking at it carefully or by taking the reports of a lot of people who looked
at it carelessly is like this famous old problem: Nobody was permitted to see
the Emperor of China, and the question was, What is the length of the Emperor
of China's nose? To find out, you go all over the country asking people what
they think the length of the Emperor of China's nose is, and you average it.
And that would be very "accurate" because you averaged so many people. But
it's no way to find anything out; when you have a very wide range of people
who contribute without looking carefully at it, you don't improve your
knowledge of the situation by averaging._

I think tarot cards are a lot simpler and more accurate. Mine suggest that
Barack Obama should beware of the tall tower with the lightning bolts, and
that a hooded figure carrying three sticks will bring him five golden discs.
Meanwhile, Hillary Clinton will be menaced by a demon-like creature with the
face of Rudy Giuliani, and will fight back by swinging swords at it while
blindfolded. Or something.

~~~
dejb
People in this market aren't a random sample of people in the street. They are
self-selected based on their willingness to bet money on the event. If they
are poor predictors they will lose money on average and if they are good they
will gain money. After many events the good predictors will tend to prevail
over the poor ones because they have more money to bet and they'll be more
eager to bet... Oh screw it I give up... some people just don't get odds or
markets.

~~~
mattmaroon
If there's one thing I know about gamblers, it's that their willingness to bet
money on something generally has no correlation whatsoever to their knowledge
about it. Their ability to continue betting over their lifetime certainly
does, which of course means that any prediction market that doesn't run on
real dollars is essentially useless.

But that doesn't mean the for money ones are useful. This particular one is
not. The infrequent nature of bets of this type, plus the small number of
people able to get money onto sites like that in any reasonable timeframe keep
it (at least where politics is concerned) from becoming anywhere near
efficient. It's simply too small for much in the way of smart money to even
bother with, so what you see is mostly just the result of sports bettors who
watched an hour of CNN yesterday and have nothing else interesting to wager
on.

I wouldn't be surprised if they were extremely accurate for European sports,
but for American politics they've been way off recently. The good news is,
they're very easy to exploit in any close election year. Perhaps I'll blog
about how after I do it in November.

~~~
dejb
I admit the volume isn't huge. Maybe 10K per day on the presidential
nominations. So you might be able to average placing 1K on per day without
destroying your odds. If you had even a 10% edge then that's $100 gain which
most people wouldn't be giving up their day job for. There are other markets
though. Betfair had turned over $3 million on the Dem Nom.

The funny thing is the more accurate the market is the less 'smart money'
would be attracted to profits and vice versa.

Good luck with your trading. By participating you will presumably increase the
accuracy of the market. But I think the average trader might be more
knowledgeable than you give them credit for (even ones from those non-US
places). And you never know... there might actually be something in this
'Wisdom of the Crowds' thing.

~~~
mattmaroon
My trading in November (assuming a close race) is more predicated on knowledge
of what happens to those betting markets throughout the day of the election
than any political knowledge.

As you pointed out though, I can't make retirement money on that small of
volume. I might be able to make vacation money though.

Also I should check to see if there's a difference in odds between betfair and
intrade. Might be able to run some sort of cross-site arbitrage if possible.

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DocSavage
He's now down substantially (37 to Hillary's 63).

This Irish Intrade.com website is interesting. Seems like their site markets
securities per the Howey Test, but I'm not sure. They say the user should
know:

" _Is it Legal for me to use Intrade where I live?_

The simple answer is that we cant be sure and this is why we require you to
confirm to us that your activities are permissible from your own location. If
you are in any doubt if your activities are legal from your location then you
should not use our service until you take suitable professional advise."

Anyone know the current US regulations on betting games of skill and would
this speculative market fall under that domain?

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xirium
> "Anyone know the current US regulations on betting games of skill and would
> this speculative market fall under that domain?"

I believe that it is currently illegal to gamble on US elections while in the
US. This probably applies to US citizens outside of the US too. It doesn't
stop it happening, though.

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davidw
So, finance guys, how do you make money from volatility? This thing is
bouncing around all over the place, as results come in. The winning strategy
would be one where you make money from the uncertainty, as people overreact to
various results.

~~~
dreish
Theoretically, you would only make money in an efficient market by taking a
position on something people didn't already expect, and being right about it.
I think volatility as election results come in is about as expected as sunrise
in the morning. In fact, I'd say volatility has been less than I expected,
because I thought by now either Clinton or Obama would be above 80%, and
instead it's still a coin flip.

But if you did want to bet on vol, you would need options, and I haven't seen
any derivatives on the election futures markets. Some cursory Googling turns
up nothing.

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mattmaroon
They've done a terrible job this year, having been almost as far off as the
polls.

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rrival
<http://politicalmarket.cnn.com/> is another one, and it's from InklingMarkets
(a Y-Combinator co)

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far33d
Yesterday it was 55% on Clinton.....

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dkokelley
And tomorrow, even after the voting, it will still be uncertain. There's an
idea for a startup. Create a good, secure voting service (web-based, local
machine, etc. who knows?) that calls results immediately and reliably and
you'll probably be doing pretty well.

~~~
far33d
Except you'd have to sell to the government.

And convince technophobes that it's secure. And safe. And reliable.

~~~
mrtron
And put money in the right pockets, which are tough to get access to?

~~~
rms
That's what lobbyists are for!

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rms
He slipped to 54...

