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Was Intrade being manipulated over the last month?

overcomingbias.com

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Re: Was Intrade being manipulated over the last month?

#2

Post by gojomo »

Over betting markets as a whole, it's hard to distinguish 'manipulation' from simple 'overconfidence' by a certain side.

The difference between InTrade and Betfair over long periods is the large mystery... though given the lags/fees in getting money in, and the fact the markets aren't that large -- so maximum profits aren't very high -- seem likely to be part of the answer.

There's a reasonable Robin-Hansonian-case to be made that attempts at prediction-market manipulation improve market accuracy over the long term, by increasing the rewards to those taking sides against the manipulator.

Re: Was Intrade being manipulated over the last month?

#3

Post by hooande »

The author brings up some good points about the potential for arbitrage between prediction markets. But in my experience, intrade has a strong conservative bias. This is more likely a case of people betting on their (incorrect) political convictions as opposed to intentional manipulation.

I remember observing a similar thing around the betting on the supreme court healthcare decision. The odds were 3-4 points more against the legislation on intrade than they were on other sites. The comments were overwhelmingly partisan and conservative. "The Supreme Court will find this unconstitutional because Obama is a socialist."

The idea behind prediction markets is that people will only bet when they know something that the rest of us don't. But we shouldn't underestimate the human ability to convince ourselves that everyone else feels as strongly about an issue as we do.

Re: Was Intrade being manipulated over the last month?

#5

Post by CamperBob2 »

hooande wrote: post #3

The author brings up some good points about the potential for arbitrage between prediction markets. But in my experience, intrade has a strong conservative bias. This is more likely a case of people betting on their (incorrect) political convictions as opposed to intentional manipulation. I remember observing a similar thing around the betting on the supreme court healthcare decision. The odds were 3-4 points more ag…

In addition to what you're saying, it could have made sense to buy Obama calls, so to speak, if you think your taxes are going to go up significantly under his second term. That behavior would severely distort Intrade's purpose as a prediction market.

Re: Was Intrade being manipulated over the last month?

#7

Post by Dn_Ab »

My friend and I also did some 'arbitrage', we almost didn't do it because we were sure we had something wrong, I mean, aren't markets supposed to be efficient? We even made a program that calculated optimal amounts and alerted us when the odds were aligned to a particular criteria taking into account exctraction fees, exchange rates, commission and stuff.

Our only explanation was that betfair (our other side) was mostly European while Intrade was mostly American so it is possible that lots of Intrade betters were buying into the media's attempt to try to make the race a lot closer than it was while the Europeans were not so biased. I don't know but it is a simpler explanation than someone purposely losing money because they think influencing a prediction market would affect the actual outcome?

Re: Was Intrade being manipulated over the last month?

#8

Post by jsdalton »

pg wrote: post #4

I've been wondering about this for week. Is there a statistical smoking gun anywhere?

One could look at the state-by-state markets in the weeks leading up and see if the probability predicted differed greatly from the main market. It would be far trickier to manipulate the markets state by state in such a way that their probable outcomes aligned with the probable outcome of the national markets.

I just looked at the InTrade state numbers from 11/2 (which I have on a spreadsheet) and running a few dozen simulations I was getting Obama winning about 80%. That's a pretty significant difference from where the national numbers were on 11/2 (I think about 66% maybe?)

Of course, if they differ it might just be because the Intrade market is imperfect, in which case it would represent a nice arbitrage strategy for the next election...

Re: Was Intrade being manipulated over the last month?

#10

Post by qq66 »

If a prediction market is famous enough to affect an election, it will generally cost more than $1 million to manipulate. I doubt that voter turnout would have increased if Intrade had predicted a Romney win -- too few Americans know what Intrade even is.
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