31–40 of 201 posts
Someone should make a tool to invest against the prediction markets overconfidence without considering the specific predictions
Could you give a specific example?
Identify areas of likely incorrect spreads, and invest against them.
I worked at a prediction market startup for a while. Even completely rational prediction markets generally have a structural problem with events with likelihoods close to 1.0 or 0.0. This leads to cases where conspiracy type events have much higher likelihoods than they should, leading people to assume the market has lost all rationality when actually it hasn't. For example, imagine if there's an event with a predict…
What if the deposited USD automatically earned interest at the current risk free return (think something like USDC on Aave in crypto land)?
I worked at a prediction market startup for a while. Even completely rational prediction markets generally have a structural problem with events with likelihoods close to 1.0 or 0.0. This leads to cases where conspiracy type events have much higher likelihoods than they should, leading people to assume the market has lost all rationality when actually it hasn't. For example, imagine if there's an event with a predict…
I worked at a prediction market startup for a while. Even completely rational prediction markets generally have a structural problem with events with likelihoods close to 1.0 or 0.0. This leads to cases where conspiracy type events have much higher likelihoods than they should, leading people to assume the market has lost all rationality when actually it hasn't. For example, imagine if there's an event with a predict…
> Assuming the market uses real money, then on paper someone should be able to make a roughly 2% return by betting that the event won't occur. However, if this market isn't closing for a while (for example for an election at the end of the year), then no-one is incentivised to take the bet and correct the market, because they'll get a much better risk free return just by putting their money in a term deposit and coll…
Is there any possibility of unwinding the distortion caused by site fees, time-value issues, and other market imperfections to recover the true odds implied by the betting markets, or is it just too complicated for that to be feasible?
It would be nice to have a site like electionbettingodds.com but with intervals rather than point preditions. Given the betting odds it's possible to calculate upper and lower bounds on the probabilities. Ideally you would take into account the fees and the opportunity cost of having your money locked in the bet. The bounds would be the range in which it wouldn't be possible to make an expected profit by betting eith…
A probability distribution is defined over a set of outcomes. If “Michelle Obama winning” is one independent, categorical outcome, then there is one probability associated with that outcome.
> you'd get something like "the probability of Michelle Obama winning the election is between 7.0% and 0.01%"
Stacking another layer of probability on top of probability distributions still results in only one final distribution for prediction purposes.
I think maybe what you’re trying to capture is how your “confidence” about a prediction ties into the evaluation of the reward or penalty. This would just be modulated by adjusting how wide/uniform your probability distribution is and the amount that you bet, but perhaps the websites could add some tools to help people visualize this better.
The 2020 elections were such a shitshow on PredictIt. So many trades were skewed by partisan bias that it was shockingly easy to make money. My favorite trade that year was for some reason the "market" was pricing in a lower turnout in 2020 vs 2016. I grabbed a strip of the over bets at big discounts. I still to this day don't understand what people were thinking with their bets there. A hugely contested election dur…
As I recall "no concession" was priced at like 40c, at the same time that Biden winning the election was priced at something like 55c-60c. I was pretty sure Trump was not going to concede, period, so this was just a substantially cheaper version of betting "Biden wins". And as it turned out, it also had the advantage that it closed much, much sooner than the actual election market -- thus freeing up my funds to go into those other markets that hung at 85c or so till December.