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Who wins and who loses in prediction markets? Evidence from Polymarket

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Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#51

Post by Retr0id »

postflopclarity wrote: post #47
skybrian wrote: post #39

Earlier quoted context omitted.

Maybe the guidelines should be changed? Something about: don’t complain about comments just because they’re AI.

I'm not complaining "just" because it's AI. I'm complaining because it's AI, and also slop. > resolves into "cross-venue infrastructure" — which is also a more durable edge than within-venue alpha anybody who actually trades knows that on these markets, "cross venue infrastructure" (aka vibe coding some exchange api integrations) is much less important / durable than actual alpha.

Slop aside, do you think it's reasonable to assume a decent fraction of those making consistent profits are arbitrage bots?

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#52

Post by Balgair »

amelius wrote: post #35
vcf wrote: post #18

Earlier quoted context omitted.

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.

Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong…

I mean, do we want the economy to be stable?

Not in a 'oh the rich don't so they control the media and so we don't' sorta way. But like in a 'lets educate people on the pluses and minuses, debate a while, and then come to an informed conclusion' sorta way.

Like, deep down, does the average person actually want a stable economy? Because it seems to me that there is an even split historically between the folks that want stability and a little patch of land and weekly rhythms, and the folks that just want to drunkenly burn couches in the street every full moon, or some such thing.

Not to be glib here at all. I like, would actually like to know the answer. Sorry if this comes off the cuff seeming.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#53

Post by skybrian »

postflopclarity wrote: post #47
skybrian wrote: post #39

Earlier quoted context omitted.

Maybe the guidelines should be changed? Something about: don’t complain about comments just because they’re AI.

I'm not complaining "just" because it's AI. I'm complaining because it's AI, and also slop. > resolves into "cross-venue infrastructure" — which is also a more durable edge than within-venue alpha anybody who actually trades knows that on these markets, "cross venue infrastructure" (aka vibe coding some exchange api integrations) is much less important / durable than actual alpha.

That sounds plausible. Not a trader so I wouldn't know. Saying at least a little about what's actually wrong with it seems more useful than just saying it's slop, which gives me very little info over just a downvote.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#54

Post by myroon5 »

manas96 wrote: post #38
matusp wrote: post #13

Earlier quoted context omitted.

https://docs.polymarket.com/concepts/resolution

Interesting. Any (in)famous UMA vote debates? Or interesting Unknown/50-50 outcome resolutions?

https://www.wired.com/story/volodymyr-zelensky-suit-polymark...

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#55

Post by bee_rider »

amelius wrote: post #35
vcf wrote: post #18

Earlier quoted context omitted.

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.

Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong…

Sigmoid wealth tax maybe?

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#56

Post by Retr0id »

dheera wrote: post #43
Retr0id wrote: post #25

Earlier quoted context omitted.

"predicting the future" and "correct analysis of all available information" often aren't all that different.

Not really. Not all players in prediction markets are rational players. A good chunk of it are there for entertainment, and analyze things incorrectly; you can take the other side of those trades, and you won't need to predict the future.

Deciding that someone else's prediction is wrong is a prediction in and of itself.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#57

Post by tsimionescu »

locallost wrote: post #20
SamTinnerholm wrote: post #3

[flagged]

I don't think that's surprising because the alternative would be that some people are able to predict the future. Whatever strategy one might figure out that works is long term destined to fail, as other people start using them. The only real way to make money there is by providing liquidity since it's a zero sum game. For the stock market this is not true because it's not zero sum, it grows over time.

There are some bets on prediction markets where the future is either already known or in the control of people who may be participating in the market. For example, when people bet on how long the next presidential briefing will be, it doesn't take a prophet to predict this, anyone who organizes said briefing can control it (at least with a very high probability).

So, the question becomes "what is the preponderence of such bets" and "how many people with control or knowledge of bet outcomes actually participate in the market" - not "can some people see the future of any bet better than others".

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#58

Post by tsimionescu »

mathgradthrow wrote: post #50
cortesoft wrote: post #29

Earlier quoted context omitted.

There is alternative to being “able to predict the future”, which is “I already know the future” or “I can change the future”

Someone flips a coin and looks at it, what orders are you willing to put in? The potential for insiders should be represented by a complete loss of liquidity.

And yet, many people bet on things like the duration or contents of press conferences, of pre-taped shows, etc.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#59

Post by cluckindan »

dheera wrote: post #32
locallost wrote: post #20

Earlier quoted context omitted.

I don't think that's surprising because the alternative would be that some people are able to predict the future. Whatever strategy one might figure out that works is long term destined to fail, as other people start using them. The only real way to make money there is by providing liquidity since it's a zero sum game. For the stock market this is not true because it's not zero sum, it grows over time.

The stock market is arguably zero sum as well, just that directionally betting on the US has generally worked during the golden years of the US economy. The stock markets of the world aren't a money printer.

They can be in cases where investment lenders don’t have 100% capital requirements, but that’s generally no different from other banks.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#60

Post by [deleted] »

Retr0id wrote: post #56
dheera wrote: post #43

Earlier quoted context omitted.

Not really. Not all players in prediction markets are rational players. A good chunk of it are there for entertainment, and analyze things incorrectly; you can take the other side of those trades, and you won't need to predict the future.

Deciding that someone else's prediction is wrong is a prediction in and of itself.

[deleted]
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