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Prediction markets have an elections problem

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Re: Prediction markets have an elections problem

#121

Post by OscarCunningham »

Xcelerate wrote: post #39
OscarCunningham wrote: post #18

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…

> instead of an absurd point estimate like "Michelle Obama has a 6.90% of winning the election" 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…

Yes, I agree that in principle every person should have a probability for each event. But what does the market tell us about what our own belief should be? If you don't have any nonpublic information and you trust the market to be efficient then your assumption should be that you yourself cannot make an expected profit in the market. So the useful information from the market can be given in terms of the bounds within which you can't bet profitably. You yourself should update your probabilities to be within those bounds.

Re: Prediction markets have an elections problem

#122

Post by blackshaw »

neilkk wrote: post #77
eli wrote: post #58

Earlier quoted context omitted.

But those things at least partly explain the apparent irrationality. PredictIt charges 10% fee on profits and another 5% fee on withdrawals. So bets that have the potential to earn a few cents on the dollar aren't necessarily worth it. That's before considering how long you have to lock up your money in this contract.

The implied probability of Brexit a few days before was around 25%. The implied probability of Trump beating Clinton a few days before was around 20%. Neither the time value of money nor the cost of trading explain these dislocations.

So? 25% doesn't mean it can't happen. I wouldn't cross the road if there was a 25% of being hit by a car.

The real way to measure predictive accuracy is to find _all_ the times they gave something a 25% chance of happening. If the predictions are accurate then roughly 25% of those things should have happened.

Re: Prediction markets have an elections problem

#123

Post by paulpauper »

bluedays wrote: post #110
mattmaroon wrote: post #67

I am a former professional gambler and now I don’t gamble much, because I have neither the time nor interest to find good wagers, but what I do is on predictit. Being a great gambler mostly means not gambling until you have an edge, and what he says about and market being less accurate than 538 is true in my experience. I’ve been betting on there every couple years for maybe ten or so, it’s held up well. As many ment…

How does that work? Being a professional gambler, I mean. I'd love to know more about this.

like r/wallstreetbets. Some people making consistent huge $ over there. You look for a setup which has a edge, like buying 0-day SPY calls if the market is down a bit. Backtest strategy and use something like the Kelly formula to find optimal betting amount. if you can make a living at this, then I guess that would make you a professional.

Re: Prediction markets have an elections problem

#125

Post by smfjaw »

mattmaroon wrote: post #67

I am a former professional gambler and now I don’t gamble much, because I have neither the time nor interest to find good wagers, but what I do is on predictit. Being a great gambler mostly means not gambling until you have an edge, and what he says about and market being less accurate than 538 is true in my experience. I’ve been betting on there every couple years for maybe ten or so, it’s held up well. As many ment…

you took on the settlement risk and got paid for it, if you look into financial markets and central clearing and OTC contracts, central clearing/exchanges effectively get rid of that issue.

Re: Prediction markets have an elections problem

#126

Post by codexb »

j_maffe wrote: post #53
fulladder wrote: post #35

The author does not understand bid-ask spreads, does not understand distortions created by fees, does not understand that the last trade price is not the same as what you can get at present, and just generally does not understand the realities of trading in markets. This article is a zero-information void.

The article shows that the average predicted likelihood is frequently illogical. That is not zero-information.

The author claimed that 90% was illogical; that it should have been closer to 98-99%. What the author failed to realize is that there are overhead costs in betting -- 10% rake, 5% withdrawal, etc. that cut into that 98-99% margin.

Re: Prediction markets have an elections problem

#127

Post by olalonde »

tshaddox wrote: post #112
mattmaroon wrote: post #67

I am a former professional gambler and now I don’t gamble much, because I have neither the time nor interest to find good wagers, but what I do is on predictit. Being a great gambler mostly means not gambling until you have an edge, and what he says about and market being less accurate than 538 is true in my experience. I’ve been betting on there every couple years for maybe ten or so, it’s held up well. As many ment…

> But even then, you bet 93 cents to win 7 and then pay 5% on cashout so it wasn’t exactly making people rich. Don't forget the risk of the whole prediction market ceasing to exist or doing something blatantly fraudulent.

As a former arbitrager on MtGox, Crypto X Change and TradeHill, that's a real risk...

Re: Prediction markets have an elections problem

#129

Post by dexwiz »

Geezus_42 wrote: post #113
bluedays wrote: post #110

Earlier quoted context omitted.

How does that work? Being a professional gambler, I mean. I'd love to know more about this.

Pretty sure it's a joking way of saying they used to be a day trader.

You can grind out poker games for a living, especially when there is a steady stream of rubes that think they’re hot stuff because they clear out friendly home games. In the long term those kind of people always lose to the pros.
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