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Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

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Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#41

Post by ApolloFortyNine »

freejazz wrote: post #17

People keep saying they provide the market with information, and that's the benefit of allowing the insider trading, but no one has pointed out how in any way society has benefitted from the insider trading instances so far...

It's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election.

But for so many things, there's just too many sources of insider info. Reality television especially, the last couple seasons of Survivor have been clearly leaked if you look at a prediction market. And since all of production knows, and obviously all the players know, someone tells their family members, and all of a sudden you have a few hundred people who know for sure who will win.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#43

Post by mathgradthrow »

Everytime someone loses money on a bad bet in a prediction market, it's an opportunity for them to learn something about ~~counter-party risk~~ adverse selection. You could easily make the argument that the more people are losing in prediction markets, the more learning is happening.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#45

Post by alexpotato »

hx8 wrote: post #12

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. *…

> I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them.

Polymarket actually wrote an article about "copycat trading": https://news.polymarket.com/p/copycat

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#46

Post by luisln »

ApolloFortyNine wrote: post #41
freejazz wrote: post #17

People keep saying they provide the market with information, and that's the benefit of allowing the insider trading, but no one has pointed out how in any way society has benefitted from the insider trading instances so far...

It's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election. But for so many things, there's just too many sources of insider info. Rea…

The 2024 prediction market had like several large bettors on the Trump side https://www.bloomberg.com/news/features/2024-10-25/polymarke.... The Harris side had no equivalent counter-whales. So the ~60% Trump prediction was not really reflecting reality, more-so individual conviction. A more retail-only market would likely have priced it closer to 52–55% Trump, which matches with what the pollsters and mainstream media said.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#47

Post by rwmj »

ModernMech wrote: post #38
hx8 wrote: post #12

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. *…

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just m…

True, but hx8 isn't to blame here and was simply trying an interesting experiment. Blame the system instead.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#48

Post by freejazz »

dd8601fn wrote: post #40
freejazz wrote: post #17

People keep saying they provide the market with information, and that's the benefit of allowing the insider trading, but no one has pointed out how in any way society has benefitted from the insider trading instances so far...

The answer is pretty obvious, right? It doesn’t reliably deliver on that promise, and in the meantime they rake billions on unregulated gambling with near zero institutional exposure.

For sure I agree, but was of course severely downvoted every time I asked how anyone besides the inside trader benefit. Aaaand now I'm being downvoted again.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#49

Post by ModernMech »

rwmj wrote: post #47
ModernMech wrote: post #38

Earlier quoted context omitted.

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just m…

True, but hx8 isn't to blame here and was simply trying an interesting experiment. Blame the system instead.

I did blame the system, I said it's the trap of modern society. The only reason hx8 fell into this trap was because they thought it would be profitable, that's not a moral failing on the part of the poster.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#50

Post by freejazz »

ApolloFortyNine wrote: post #41
freejazz wrote: post #17

People keep saying they provide the market with information, and that's the benefit of allowing the insider trading, but no one has pointed out how in any way society has benefitted from the insider trading instances so far...

It's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election. But for so many things, there's just too many sources of insider info. Rea…

>It's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election.

How did that number more greatly reflect reality than the polls?

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