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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

#161

Post by lxgr »

tptacek wrote: post #61
giarc wrote: post #60

Earlier quoted context omitted.

"that a prediction market effectively liberates the directional content of that information by converting it into prices." I can see this, and I guess maybe my issue is with the phrasing of "aggregating" insider information. Because you aren't just aggregating insider info, you are also aggregating non-insider information, but no one (but the insider) knows what is right. Is there different types of prediction market…

I would argue that a "market" in whether it will rain on Saturday isn't really a prediction market, or even a market, at all. It's just a bookmaking operation. The core function of any market, in anything, is price discovery. What's the difference between a "Monday it will rain" market and a NCAAF prop bet on a team's rushing yards? I could argue that DraftKings prop bets are actually more like prediction markets tha…

What would you then call, for example, the markets for weather futures on the CME? https://www.cmegroup.com/markets/weather.html

Are you arguing that weather forecasts (based on either sophisticated modeling or just extrapolating average historical data) are not a thing?

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

#162

Post by bitshiftfaced »

lxgr wrote: post #156
bitshiftfaced wrote: post #155

Earlier quoted context omitted.

While Polymarket does offer holding rewards interest, it looks like it doesn't for this particular market. That doesn't mean there aren't other explanations. It could mean that No holders expect to incur an opportunity cost greater than the risk free rate. Combine that with how there's low liquidity (there's less than $300 on the book buying Yes, and at 2 cents or less), and so we could just be seeing the effect of r…

They're offering interest on roughly a dozen hand-picked markets, according to their documentation. (I wasn't aware of that, so I stand corrected on the general assertion that they never do.) > That doesn't mean there aren't other explanations. Why do you need other explanations, when the observed probability can be precisely and fully explained by opportunity cost?

I don't have to "need" other explanations in order for them to exist. The current price does happen to accurately reflect what the risk free rate would imply. But look at the graph history: it hovered around 1% for a large chunk of December.

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

#163

Post by FireBeyond »

lxgr wrote: post #145
tlb wrote: post #104

Earlier quoted context omitted.

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.

Didn’t Walmart (and perhaps others) used to do that?

May even have been referred to as Dead Peasants Insurance.

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

#165

Post by tptacek »

lxgr wrote: post #159
tptacek wrote: post #23

Earlier quoted context omitted.

The entire idea of a prediction market is to aggregate insider information. If you don't have insiders, you're not doing predictions, you're just doing gambling. Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing . The insider whales are the only ones actually using it for its intended purpose.

Would you argue the same for the stock market, i.e., that the only rational active market participants are insider traders? If not, why not?

I would say that the popular conception of insider trading as a problem of fairness to other traders on financial markets is misapprehended, but no, it's not at all true that the only rational actors on financial markets are insiders.

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

#166

Post by tptacek »

lxgr wrote: post #160
tptacek wrote: post #53

Earlier quoted context omitted.

The idea is that people have all sorts of fragmentary information about future events that they can't directly reveal, due to confidentiality or trade obligations (among other things), and that a prediction market effectively liberates the directional content of that information by converting it into prices. Robin Hanson can credibly claim to have invented prediction markets as we understand them today.

You seem to be arguing that that's the canonical definition of a prediction market, and anything else, including markets merely aggregating non-insider beliefs about future events, should be called something else. Do you have a better proposal?

I don't need one.

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

#167

Post by tptacek »

urxvtcd wrote: post #110
tptacek wrote: post #59

Earlier quoted context omitted.

The original prediction markets were internal things at large companies, which I think are a great idea. I've flirted for a long time with doing a vulnerability prediction market. The good-faith incarnations of prediction markets aren't open to all comers; they're structured so you can't meaningfully gamble on them.

How isn’t a knowledgeable person incentivized to find vulnerabilities but not disclose them?

I don't understand your question, sorry.

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

#168

Post by tptacek »

anigbrowl wrote: post #90
tptacek wrote: post #23

Earlier quoted context omitted.

The entire idea of a prediction market is to aggregate insider information. If you don't have insiders, you're not doing predictions, you're just doing gambling. Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing . The insider whales are the only ones actually using it for its intended purpose.

If you don't have insiders, you're not doing predictions, you're just doing gambling. Non-insiders can't make predictions? I'm not into betting as a hobby but I make minor bets with myself or friends on topics with clear win-loss conditions in areas of politics where I consider myself knowledgeable. I'm pretty good at it since I find it easy to distinguish between results I'd like to see vs what I expect to actually…

They can, they're just not doing anything they couldn't do at a blackjack table.

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

#169

Post by lxgr »

tptacek wrote: post #166
lxgr wrote: post #160

Earlier quoted context omitted.

You seem to be arguing that that's the canonical definition of a prediction market, and anything else, including markets merely aggregating non-insider beliefs about future events, should be called something else. Do you have a better proposal?

I don't need one.

Sure, but then discussions about these types of markets are bound to become somewhat confusing for purely nominalistic reasons. (Turns out not every hard naming problem is automatically computer science :)
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