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Whats the difference between a prediction market and a futures market? Which sounds like a joke. But I am unable to think of one right now. Actually... how is this different from the stock market. You buy and sell based on how the market is predicted to go..
Free markets tend to lead to a positive feedback loop. Someone who has a lot of money will be able to predict the market better than someone who has less. Their advantage generates more wealth which helps them to predict the market better. Wealth generates more wealth.
In theory, this is offset by the notion that the market is not a zero sum game. The person may be generating new, previously unavailable, wealth. But while stock performance is tied to the success of a company (which can generate new wealth), prediction markets are tied to transient questions (where intrinsic value diminishes the closer you get to expiry). In this sense, how "predictions" might generate "new value" is unclear.
Prediction markets and bookmakers really strongly expected a Clinton win in 2016. Irish bookies were so sure Trump would lose that one firm began paying out to those who bet Clinton even before the election. And we all know how that turned out. Nov. 7, 2016: "Hillary Clinton’s odds of winning the presidency rose from 78% last week to 91% Monday before Election Day, according to CNN’s Political Prediction Market." htt…
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>The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout) As opposed to the stock market? >There's a reason that insider trading is illegal; prediction markets are inordinately susceptible to Goodhart's Law. Insider trading is only illegal because you're abusing your position of trust as an employee. You ha…
yes, as opposed to the stock market; if i go buy AAPL calls, i can’t expect to manipulate apple’s share price by, say, buying a bunch of iphones. conversely, i can’t buy puts, hoping that my stock sell off will effect them being in the money at expiry. something something market forces and what not, but the long and short of it (no pun intended) is that.. if it were profitable, people would be doing it. insider tradi…
Did you miss my entire paragraph on activist investors? The only difference between them and you is that they're putting way more effort into it.
>insider trading is illegal for numerous reasons, “abuse of trust” isn’t wrong, it’s just wholly incomplete.
That's the canonical reason, at least in us securities law. https://en.wikipedia.org/wiki/Insider_trading#United_States_...
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It's a question of scale. A few horses aren't a big deal, and both sides (the horse racing, and the bet) are heavily constrained in scope. Both sides become far less constrained with prediction markets. Maybe if we were objective, horse betting should be shut down -- but we kinda don't care.
Match-fixing likely has just become part of the game and the odds.
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I've heard this argument before: you're fully capable of making tons of money, but not particularly interested in proving it for some reason.
> I've heard this argument before: you're fully capable of making tons of money, but not particularly interested in proving it for some reason. you have completely misunderstood I have zero interest in losing money by "investing" in outcomes of events that are essentially random because it's not investing, it's gambling
The difference is that a Poker tournament is just entertainment for the audience. With prediction markets there is the very useful side effect of accurate forecasts.
I would like to test whether prediction markets are worse than they were during zero-interest land. The incentive to create sophisticated models to get low percentage points of edge is much lower today than it was before. Why risk time and effort trying to predict the 2024 election for a few pp of edge when you can… just buy a 1y tbill instead? Sure there are probably better ways to express an opinion on these types…
Prediction markets are nearly 50-50 for democrat vs republican president currently. That is a 100% yield if you are correct. It isn't about the yield. It is about much more accurate you are. If your oracle gives you 60-40, you will still lose lots of bets but you will easily beat the 5% yield of treasure bills.
If prediction markets could tell the future one would imagine the first person to harness them would now be the most wealthy and powerful person to have ever lived. So, you know, DOUBT.
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Insider trading is illegal because the non-insiders would stop trading otherwise. Prediction markets have some problems but this isn't the biggest one. One can even use it for good. If a company gives its associates stocks but prevents them to sell for some time, this is essentially the same mechanism. For example, we could make prediction markets about upcoming policy and laws and their impact. Then we can tell the…
Not so, I would just buy whatever the insiders are buying a bit later. The argument against insider trading is a bit weak because it seems impossible to enforce effectively and I don't see why anyone would assume insiders are anything but active in the market. Picking on stocks as an example, there is a background fair market rate that everything should theoretically achieve. Insiders way outperform that - but most p…