One cost not mentioned is tying your money to a bet. Getting an expected profit of 10% is great if bet gets resolved next week, but only 5%/year if you have to bind your money for 2 years.
Therefore expect bets resolving sooner to have more accurate predictions.
A market as big as these has a lot of entrants, and it's not likely that just one is so much smarter than the others that he can fool everybody. My money (which I'm not betting) is on the crowd.
How can an odds estimate meaningfully be wrong? Doesn’t that make odds more of a value belief than a fact belief?
You’re saying it yourself at the end: you can’t ever tell if a single prediction was wrong. There’s no way to empirically test or validate whether the odds _really_ were 55% or 60% or 90%. You can evaluate something’s predictive track record over a long period of time, but whether or not to trust the predictions a system has made is, ultimately, a value distinction, not a fact one.
So unless there are true correct values, there can’t be factually incorrect probabilities in a betting market.
As an additional data point, note that the market itself does not consider the polling models too accurate. If it did, others would take the against stance to Milk the favourable odds, as this information is public. Given this, I think it most likely that the markets are a better reflection of the prior true odds..
I've been watching the gyrations over the past 4 days, when they became pretty intense. You make the data case better tahan I could, but by yesterday I had decided that it was an attempt to depress voters in one direction and pump them up in the other, because otherwise I could see no profit at all.
The alternative explanation is that there are wealthy people who are pretty sure Trump will win and willing to bet on it if they get reasonably good odds, other wealthy people pretty sure Harris will win. If the first group push the odds up the second sees it as an opportunity to make money pushing them back down,
One cost not mentioned is tying your money to a bet. Getting an expected profit of 10% is great if bet gets resolved next week, but only 5%/year if you have to bind your money for 2 years.
Therefore expect bets resolving sooner to have more accurate predictions.
There were allegations that the Maltese government had done this for the 2021 Eurovision Song Contest, so surely there will be allegations that people are doing it for political betting as well. https://wiwibloggs.com/2021/11/23/malta-government-investigation-no-irregularities-in-eurovision-2021-spending/267354/
I'd think that smart money would soon correct any such problems.
A market as big as these has a lot of entrants, and it's not likely that just one is so much smarter than the others that he can fool everybody. My money (which I'm not betting) is on the crowd.
Ten to one says no matter who wins, it's interesting times ahead. ;-)
WSJ has article re some guy who bet $30MM on Trump victory...
Re whether these markets are being manipulated, here's an article which purports to identify the whale on Polymarket: https://www.wsj.com/finance/trump-odds-polymarket-election-betting-whale-3d94bed3
How can an odds estimate meaningfully be wrong? Doesn’t that make odds more of a value belief than a fact belief?
You’re saying it yourself at the end: you can’t ever tell if a single prediction was wrong. There’s no way to empirically test or validate whether the odds _really_ were 55% or 60% or 90%. You can evaluate something’s predictive track record over a long period of time, but whether or not to trust the predictions a system has made is, ultimately, a value distinction, not a fact one.
So unless there are true correct values, there can’t be factually incorrect probabilities in a betting market.
As an additional data point, note that the market itself does not consider the polling models too accurate. If it did, others would take the against stance to Milk the favourable odds, as this information is public. Given this, I think it most likely that the markets are a better reflection of the prior true odds..
I've been watching the gyrations over the past 4 days, when they became pretty intense. You make the data case better tahan I could, but by yesterday I had decided that it was an attempt to depress voters in one direction and pump them up in the other, because otherwise I could see no profit at all.
The alternative explanation is that there are wealthy people who are pretty sure Trump will win and willing to bet on it if they get reasonably good odds, other wealthy people pretty sure Harris will win. If the first group push the odds up the second sees it as an opportunity to make money pushing them back down,
Certainly bettors can be wrong, otherwise it wouldn't be worth betting.
My friend responded to your article here. https://scanalyst.fourmilab.ch/t/election-betting-odds-2024/4819/17