RSS feedA few notes on intrade
1. Intrade is not perfect, which is why I have dabbled in it from time to time. But, remember, the traditional retort to skeptics applies: If you think it is so bad, why aren't you rich trading there?
2. Intrade just "got it wrong" on the SCOTUS and the mandate. They were giving 75% chances to it being struck down. Actually, if they give things 75% chance and they do not go the other way at least 1 in 4, then intrade would be wrong in a much more important sense and you could get rich on intrade. I have not seen any longer term statistics on their predictive power.
3. Every so often, someone looks up intrade and says: Look, it is silly: Obama has 54% and Romney 42%, therefore there is only a 96% that either will be President.
Again, if you think this is so silly, why don't you just buy both Obama and Romney and make that tidy profit? There are two points to consider:
(a) The percentage value that intrade gives you is actually not corrected for the fact that they are holding your money. If you buy both Obama and Romney and one of them does get elected, you are basically lending intrade at about 8~10% a year; not bad, but how's their risk rating, what if they go broke?
On a related subject, the intrade interface is slightly misleading: you want to buy when you think that the event is more likely than the current price, even if you still think it will not occur. So, if the current estimate is ~5% and you think it actually will occur 1 in 10 times, then you should buy.
(b) A 5% chance for an election is a once-in-a-century-event. Thinking that one of the candidates will be unavailable (dead, very ill, victim of a scandal so big that their party switches the candidate at the last minute so they can "spend more time with their families") is such a remote possibility that it will not happen even once in a century.
- Again, if intrade is so bad, why aren't you rich?