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Prediction markets can tell the future. Why is the US so afraid of them?

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Re: Prediction markets can tell the future. Why is the US so afraid of them?

#31

Post by johnfn »

blibble wrote: post #30
johnfn wrote: post #27

Earlier quoted context omitted.

If that were true then the results of prediction markets wouldn't closely track the actual results that happen, as the link I provided shows that they do. Also, you could be making tons of money right now! How's that going?

> Also, you could be making tons of money right now! How's that going? as someone who has spent most of their career working on trading floors watching professional traders do their jobs I'm perfectly happy staying the hell away from prediction "markets", thank you very much

I've heard this argument before: you're fully capable of making tons of money, but not particularly interested in proving it for some reason.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#32

Post by blibble »

johnfn wrote: post #31
blibble wrote: post #30

Earlier quoted context omitted.

> Also, you could be making tons of money right now! How's that going? as someone who has spent most of their career working on trading floors watching professional traders do their jobs I'm perfectly happy staying the hell away from prediction "markets", thank you very much

I've heard this argument before: you're fully capable of making tons of money, but not particularly interested in proving it for some reason.

> I've heard this argument before: you're fully capable of making tons of money, but not particularly interested in proving it for some reason.

you have completely misunderstood

I have zero interest in losing money by "investing" in outcomes of events that are essentially random

because it's not investing, it's gambling

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#34

Post by aidenn0 »

johnfn wrote: post #29
aidenn0 wrote: post #15

Earlier quoted context omitted.

#3 makes it look like things predicted as "very likely not" (10-20%) and "very likely so" (80-90%) tend to be biased towards the contrarian view. Does Metaculus have limits that make it unprofitable to make bets things that would push them outside the window? Anecdotally I've seen quotes from prediction marktets that show a surprisingly high chance for things that are incredibly improbable (to the point that I would…

I've been snagged by a few markets that were in the high 90s or low 10s and looked like free money, but ended up resolving the other way. It's usually either 1) there was some subtlety in how the market was written that causes it to resolve unexpectedly or 2) a true inversion - it just seems like human nature to under-predict how often they actually happen.

In this case the markets are overpredicting inversions; there's at most a very small difference between how often markets predicted at 5% and markets predicted at 20% resolve as "no." Same for the 75%-95% range.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#35

Post by c0m »

I would like to test whether prediction markets are worse than they were during zero-interest land. The incentive to create sophisticated models to get low percentage points of edge is much lower today than it was before. Why risk time and effort trying to predict the 2024 election for a few pp of edge when you can… just buy a 1y tbill instead? Sure there are probably better ways to express an opinion on these types of things too. Options that favour a team red or team blue win come to mind, but no matter what you’re still competing with 5% yield.

I think this is solvable by having some kind of betting token that itself accrues interest over time to reduce the opportunity cost but if regulators already don’t like prediction markets boy they especially wouldn’t like that.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#36

Post by kcb »

roenxi wrote: post #20
qznc wrote: post #17

Earlier quoted context omitted.

Insider trading is illegal because the non-insiders would stop trading otherwise. Prediction markets have some problems but this isn't the biggest one. One can even use it for good. If a company gives its associates stocks but prevents them to sell for some time, this is essentially the same mechanism. For example, we could make prediction markets about upcoming policy and laws and their impact. Then we can tell the…

Not so, I would just buy whatever the insiders are buying a bit later. The argument against insider trading is a bit weak because it seems impossible to enforce effectively and I don't see why anyone would assume insiders are anything but active in the market. Picking on stocks as an example, there is a background fair market rate that everything should theoretically achieve. Insiders way outperform that - but most p…

If everyone bought whatever the insiders were buying there would be no one to take the other side.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#37

Post by not2b »

johnfn wrote: post #21
not2b wrote: post #18

Earlier quoted context omitted.

We have no way of exploring the multiverse or running the same election more than once, so there isn't any evidence that the payout from a prediction market matches the probability of something happening. It's just collecting the predictions of people who are willing to bet money, weighted by how much they spend, and calling that the prediction. I don't think rich people are necessarily better than not-so-rich people…

Is this a response to the metaculus track record, which is an aggregate of the accurate of all predictions ever made on the platform, and shows that predictions fall close to accurate probabilities? Which part of the track record do you find fault with?

I looked at it.

Their FAQ says that they aren't a prediction market, and they operate differently. People aren't placing bets, so it isn't weighted in favor of the wealthy. They weight people based on past prediction success.

So, maybe their approach works better.

See https://www.metaculus.com/help/faq/

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#38

Post by gruez »

kibwen wrote: post #7

The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout). It quickly stops being a place to gauge the likelihood of an event, and turns into a roundabout contract bidding mechanism, the most famous example being "the likelihood that so-and-so famous politician will be dead by next year" is just an anonymize…

>The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout)

As opposed to the stock market?

>There's a reason that insider trading is illegal; prediction markets are inordinately susceptible to Goodhart's Law.

Insider trading is only illegal because you're abusing your position of trust as an employee. You having an incentive to make the stock go higher is totally fine. In fact that's how activist investing works. You buy shares in a company, use that to get control and turn the company around, and sell your shares in the now more valuable company.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#40

Post by somat »

Whats the difference between a prediction market and a futures market?

Which sounds like a joke. But I am unable to think of one right now.

Actually... how is this different from the stock market. You buy and sell based on how the market is predicted to go..

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