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Prediction markets have an elections problem

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Re: Prediction markets have an elections problem

#161

Post by mikeyouse »

dataflow wrote: post #156
mikeyouse wrote: post #155

Earlier quoted context omitted.

I'm seriously claiming that if you don't read the actual terms of a legal agreement, you shouldn't wager on the outcome of that agreement. The headline statement leaves a ton of ambiguity, so any reasonable person would read the short paragraph that describes in full detail how the outcome will be measured and then bet accordingly. Caveat Emptor and all that.

No. If this was in an advertisement I'm pretty damn sure it would violate truth-in-advertising laws. Clarifications are one thing, contradictions are another. Most "reasonable" people reading it come away with an understanding of it that contradicts the fine print. Which is exactly what happened, and hence why so many people lost money. You don't get to put contradictory terms in a contract then blame it on "caveat e…

With any understanding of how GDP is measured / reported, there's no contradiction at all.. I'm honestly confused what you're finding so misleading about this particular bet.

Re: Prediction markets have an elections problem

#162

Post by dataflow »

mikeyouse wrote: post #161
dataflow wrote: post #156

Earlier quoted context omitted.

No. If this was in an advertisement I'm pretty damn sure it would violate truth-in-advertising laws. Clarifications are one thing, contradictions are another. Most "reasonable" people reading it come away with an understanding of it that contradicts the fine print. Which is exactly what happened, and hence why so many people lost money. You don't get to put contradictory terms in a contract then blame it on "caveat e…

With any understanding of how GDP is measured / reported, there's no contradiction at all.. I'm honestly confused what you're finding so misleading about this particular bet.

Is the difference between "Will the US economy hit 5.0%+ GDP growth by year-end 2020?" and "Will the US economy hit 5.0%+ annualized GDP growth in any quarter in 2020?" really that hard to understand?

Any sane person will tell you "Will the US economy hit 5.0%+ GDP growth by year-end 2020?" means GDP at the end of 2020 will be at least 5% higher than it was at beginning of 2020 (unless there's an explicit starting point mentioned). Aside from the question of the data source, it's pretty crystal clear what it means, and that it lacks any notion of quarters or annualization. And it's very obviously different from "Will the US economy hit 5.0%+ annualized GDP growth in any quarter in 2020?", which is what the fine print is measuring.

Re: Prediction markets have an elections problem

#163

Post by thaumasiotes »

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…

> It was the first time in 20 years of hoping for such an opportunity that I managed to get to bet on something that had already happened. That’s every gambler’s dream and I’m unaware of many instances of it happening without breaking laws or trickery.

There was a Chinese lottery scandal in the semi-recent past. Someone noticed that the winning numbers were posted before the close of ticket sales, and bought a winning ticket. And he completely got away with it.

Then, he did it again...

Re: Prediction markets have an elections problem

#165

Post by ramesh31 »

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…

Predictit during the 2020 election was just about the closest thing I've ever seen to free money. Shares for Texas going blue were still at $0.30 on election night. So many people wagering with their emotions and tribalism, it was unreal.

Re: Prediction markets have an elections problem

#166

Post by beacon294 »

paulpauper wrote: post #115
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…

Also, there is no need to gamble when you can just park your $ in leveraged tech funds or even something like QQQ and make a >30% ROI every year, which has been the long-term return since 2009. This is best for large amounts of cash. The huge bull market in tech, like Nvidia and Meta stock, made other type of speculation unnecessary. A lot of people doing this now.

What happens to your QQQ in a major downturn? I have never owned it during these events.

Re: Prediction markets have an elections problem

#167

Post by nojs »

blackshaw wrote: post #122
neilkk wrote: post #77

Earlier quoted context omitted.

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.

If I am asked to predict whether it will rain every day for a year, and every day I blindly predict 30% because on average it rains 30% of days in this location, am I correct? Maybe, but I’m not a very useful forecaster.

What you should optimise instead is something like log loss between the given probability and the true outcome (0 or 1). That way you’re rewarded not only for being right, but for being confident and right.

Re: Prediction markets have an elections problem

#168

Post by laserlight »

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.

https://en.wikipedia.org/wiki/Credit_risk#Counterparty_risk

Re: Prediction markets have an elections problem

#169

Post by cosmojg »

MostlyStable wrote: post #101
n2d4 wrote: post #90

Earlier quoted context omitted.

If anything then that means that they work! Situations with a 25% chance do occur sometimes! If prediction markets show 75% odds and are right 3/4 times, they are doing their job well - if they show 75% odds and right 4/4 times, they are doing their job badly! Meanwhile, both polls and analysts got those elections completely wrong, much more so than prediction markets. (IIRC, 538 was the only outlet that gave Trump a…

538 got screwed in both directions: before the election they were derided for having Trump too high. After the election they were lambasted for "only" giving him 20-30% chance.

I'm forever puzzled by the lack of rigorous coursework in probability and statistics in the American public school system, at all levels. I mean, heck, it's pretty much the only mathematical subject for which the question, "When are we ever going to use this in real life?" is trivially answered! And all the other more traditional math subjects (algebra, calculus, etc.) fall right out of it anyway. It's the perfect foundation.

Honestly, why hasn't probability-centric mathematical pedagogy taken the world by storm?

Re: Prediction markets have an elections problem

#170

Post by gnepon »

kmeisthax wrote: post #48
iouwhldkfjgklj wrote: post #46

Earlier quoted context omitted.

If you concede that people with subject knowledge can make money, that sounds to me the opposite of stupid. Sounds to that it's working as intended.

People with subject knowledge can make money, but no mechanism guarantees that the majority of people using the market are subject matter experts. If anything, most people using the prediction market are going to be people paying to make their chosen outcome look more preferable. They aren't trying to make a financial payoff on the bet, they're trying to make an emotional payoff and are willing to lose money doing so…

This is the best case scenario for prediction markets I think, as it means the odds more accurately reflect the outcome likelihood (e.g. people aren't betting against their favourite in an hedge against emotions).

At least then they would break even in an efficient market. But it isn't an efficient market due to fees and opportunity cost... So you're right, it is irrational to participate.

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