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A prediction market user made $436k betting on Maduro's downfall

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Re: A prediction market user made $436k betting on Maduro's downfall

#141

Post by bitshiftfaced »

pseudo0 wrote: post #132
BrenBarn wrote: post #86

Earlier quoted context omitted.

Some of the longshot biases still exists and can't be removed due to technical constraints on the platforms. A lot of times there is a minimum contract price, which effectively means the probability of unlikely events cannot be modeled as lower than 1% or 0.1% or whatever. But there are contracts for events much less likely than that.

There are also issues with the time value of money for long-shot events. Someone has to be willing to buy a share of "No", and if that works out to a return lower than the risk-free rate (eg. buying t-bills) there will be no incentive to take the "No" position. That makes anything roughly under 3-4% per year pretty unreliable.

Polymarket and Kalshi both pay interest on long term bets around the same as the risk free rate.

Re: A prediction market user made $436k betting on Maduro's downfall

#142

Post by bitshiftfaced »

pseudo0 wrote: post #134
jjmarr wrote: post #78

Earlier quoted context omitted.

Charlie Kirk has a 3% chance of winning a Nobel Peace Prize right now according to Polymarket. He's climbed from 1% since Maduro was arrested. It seems unlikely since Nobels aren't awarded posthumously.

The issue there is time. The Nobel prizes will be announced in around 9 months. Buying a share of "No" would currently cost 98.2 cents, working out to a (basically) risk-free return of around 2.4%. Alternatively someone who wants a very low-risk investment product could just buy 1-year t-bills with a return of... ~3.5%. And that doesn't require messing around with buying crypto and the inherent risk of trusting Polym…

Polymarket pays interest on those bets about the same as the risk free rate.

Re: A prediction market user made $436k betting on Maduro's downfall

#143

Post by bitshiftfaced »

enjeyw wrote: post #58
kurtis_reed wrote: post #48

Earlier quoted context omitted.

No, markets are evaluated on accuracy, not calibration

Well markets are evaluated on a number of different metrics depending on what you’re trying to determine. If you want to go be pedantic about it and select one metric, markets are evaluated on their Brier Score or some other Proper Scoring Rule, not accuracy. However, I prefer calibration as a high level way to explain prediction market performance to people, as it’s more intuitive.

Yeah it's a good way to introduce the idea. But I don't think someone would really grasp it until they understand why both calibration and "discrimination" are necessary in determining if a prediction market is accurate.

Re: A prediction market user made $436k betting on Maduro's downfall

#144

Post by senordevnyc »

vintermann wrote: post #123
kelnos wrote: post #72

Earlier quoted context omitted.

The money involved in prediction markets at present isn't enough for governments to bother. $436k is a nice windfall for your average individual, but that's peanuts for anyone at a level to influence government actions.

The attitude of powerful politicians to money is more, "if I can get the milk, why should I keep a cow". You don't actually need billions in your bank account, there's not so much you need to spend it on anyway and it's more trouble than it's worth. The real power is in your network. You can move money to where you want it via that - even to yourself in the form of speaking fees, if you should need some change.

You should tell this to the current administration. They all seem to be lining their pockets.

Re: A prediction market user made $436k betting on Maduro's downfall

#145

Post by lxgr »

tlb wrote: post #104
bjackman wrote: post #99

Earlier quoted context omitted.

Why should we want prediction markets to be fair? I want them to reveal facts about the world. They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading? (Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).

Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises. I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed…

> I guess there could be second-order effects when insiders can actually change the outcome

You don't need to guess. That's exactly why it's illegal: It creates bad incentives, similarly to e.g. taking out a life insurance policy on a random person you have no financial dependence on.

Re: A prediction market user made $436k betting on Maduro's downfall

#146

Post by lxgr »

bjackman wrote: post #99
kqr wrote: post #96

Earlier quoted context omitted.

Well, better synthesis of public information is also a way to win. Some people think of that as more fair. Another way to win is to use them for hedging exposure elsewhere. That also doesn't require inside information.

Why should we want prediction markets to be fair? I want them to reveal facts about the world. They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading? (Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).

If you think this through, while "fairness" might not be an end itself, it's extremely hard to imagine a market that's both unfair and efficient.

Re: A prediction market user made $436k betting on Maduro's downfall

#147

Post by lxgr »

bjackman wrote: post #126
scoofy wrote: post #113

Earlier quoted context omitted.

>Why should we want prediction markets to be fair? I want them to reveal facts about the world. I do not think this is a reasonable position. The problem is that predicting "real facts about the world" creates a situation where you could take out an place a sizable bet on your neighbors house burning down. Allowing prediction markets is, thusly, inherently problematic. Allowing them to be anonymized with insider info…

You can say you don't want prediction markets and that's fine. It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world. If you think prediction or stock markets should be "fair" then you have a very bizarre definition of fair (one that's compatible with a game that only rich people can win). Also desiring "fairness" impli…

Reveal facts about the world while influencing it as little as possible.

Otherwise, you're arguing that a gun is functionally a blood pressure monitor.

Re: A prediction market user made $436k betting on Maduro's downfall

#148

Post by lxgr »

bitshiftfaced wrote: post #142
pseudo0 wrote: post #134

Earlier quoted context omitted.

The issue there is time. The Nobel prizes will be announced in around 9 months. Buying a share of "No" would currently cost 98.2 cents, working out to a (basically) risk-free return of around 2.4%. Alternatively someone who wants a very low-risk investment product could just buy 1-year t-bills with a return of... ~3.5%. And that doesn't require messing around with buying crypto and the inherent risk of trusting Polym…

Polymarket pays interest on those bets about the same as the risk free rate.

It doesn't, or where do you think those 3% are coming from?

Re: A prediction market user made $436k betting on Maduro's downfall

#149

Post by lxgr »

sparky_z wrote: post #135
jen20 wrote: post #130

Earlier quoted context omitted.

They aren’t predicting anything if the result is known a priori. Words matter - “prediction markets” just smooths over grift by making it sound reasonable.

The result was not, and could never have been, known a priori. All sorts of random things could have gone wrong with the operation causing the raid to fail and Maduro to remain in power. Trump could have just randomly changed his mind, or postponed the raid to beyond the end of January (the cutoff for the betting market). The person placing the bet was still taking a chance, but it was an informed chance that shifted…

> you can't make money (in expectation) by providing false information

You certainly can, but that's usually called market manipulation, not insider trading.

Re: A prediction market user made $436k betting on Maduro's downfall

#150

Post by lxgr »

randyrand wrote: post #93

Using insider information is how you are supposed to win these. Otherwise it's just random gambling. This is not the stock market. There are no public reporting rules for the weather, song lyrics, what Kim Kardashian eats tomorrow.

> Using insider information is how you are supposed to win these. Otherwise it's just random gambling.

Not nearly. If nothing else, there's still time arbitrage and at least some amount of information processing required.

Even efficient markets need somebody doing the leg work and making them so, especially when unsophisticated traders are participating too.

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