niceguyanon comments on Open Thread, November 1-15, 2012 - Less Wrong

4 Post author: OpenThreadGuy 02 November 2012 02:11AM

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Comment author: niceguyanon 03 November 2012 11:07:25PM *  3 points [-]

Why is there such a large statistical "arbitrage" opportunity on Intrade right now? I am not all too familiar with prediction markets but Obama re-elected at $6.61 ask at current prices and Obama is predicted to be 84% likely to win seems like a large enough spread to make this a smart bet.

Comment author: Douglas_Knight 04 November 2012 03:04:03AM 7 points [-]

Worse, there is a 10 point actual arbitrage between Pinnacle and Intrade. Also, Betfair is close to Pinnacle. I haven't followed this long, but I believe there is a long-standing 5 point arbitrage.

Comment author: Pfft 06 November 2012 02:44:01AM *  4 points [-]

The Economist writes:

Although Intrade, the most widely cited prediction market, is fairly kind to Mr Romney and shows him with a 33% chance of victory, tight legal restrictions on deposits to the site have made it very difficult for Americans to wager there. That makes it very thinly traded and unreliable, since bets of just a few thousand dollars can move the market price substantially. The real money laid on the election goes to bookmakers, who uniformly see Mr Obama as an overwhelming favourite. Pinnacle Sports in Las Vegas shows him with a 77.5% likelihood of victory, and Ladbrokes in Britain has him at 81%.

Comment author: Douglas_Knight 06 November 2012 07:22:07PM 3 points [-]

The failure of that article to mention Betfair makes it hard for me to take it seriously.

If the Economist thinks the explanation is that Intrade is thinly traded, it should think it volatile. It is true that a small wager moves the market, but it consistently returns to 5-10 points below the bookies. Similarly, the prediction market Betfair is in exactly the same legal situation as the Intrade, has matched the same amount of money ($30 million) and has about the same amount of open interest, but consistently tracks the bookies. The question is not why do prediction markets diverge from the bookies, but why Intrade consistently diverges from everyone else.

Comment author: drethelin 03 November 2012 11:55:36PM 3 points [-]

The question is how much do you agree with Nate Silver?

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