Wednesday, September 25, 2013
In the run-up to the 2012 Presidential election, there was a lot of talk about prediction markets -- websites where people can bet online about the outcome of any given event. They're useful because they give outsiders a snapshot of what the crowd thinks is going to happen. They're also, in theory, vulnerable to manipulation. If someone were willing to buy tons of stock in an idea they support, they could make it look like a lot of people believe in it too. But no one would really do that. Because it'd be crazy and expensive. Right? From the Wall Street Journal:
"...A single trader lost between $4 million and $7 million placing a flurry of Intrade bets on Mitt Romney—perhaps to make the Republican nominee’s chance of victory appear brighter.
Two economists who studied the data offer various rationales for the trader’s aggressive wagering on Mr. Romney in the final two weeks of the campaign. The anonymous trader placed 1.2 million pro-Romney contracts, some of which were actually in the form of bets against a Barack Obama victory.
The most plausible reason for the betting, the authors conclude, is that “this trader could have been attempting to manipulate beliefs about the odds of victory in an attempt to boost fundraising, campaign morale, and turnout.”
Oof. I never thought I'd feel so much sympathy for an anonymous tycoon.
Friday, December 07, 2012
Last week the popular prediction market Intrade announced it would shut its doors to Americans after being sued by US regulators. US regulators have accused InTrade of violating the ban on off-exchange options trading - in other words, gambling. But others argue that sites like InTrade can be better predictors than pundits or polls. The New York Times’ Washington Bureau Chief David Leonhardt makes the case for prediction markets to Bob.
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