Posted on 05/27/2010 9:32:49 AM PDT by Christian_Capitalist
How the Smart Money is Betting: Rand Paul moves up 14 points in one week (Intrade)
Christian_Capitalist
May 27, 2010
Well, the early results are in from Rand Paul's first few interviews and the Republican Unity Rally, and in one week the "Republican Rand Paul to Win" Contract has moved up 14 points, rallying from 50% to a commanding 64% lead, having moved up steadily for most of the week. Concurrently, of course, the "Democrat Jack Conway to Win" Contract has collapsed from 50% to a most recent trade of 36.5% as sellers are dumping the contract (due to differences in bid/offer spreads and what not, totals do not always equal exactly 100%).
Given the historic accuracy of the Intrade Prediction Markets (see article below), Republicans can take comfort in the fact that apparently, "Parker Lewis Can't Lose". Despite his initial gaffes, Rand Paul's subsequent recovery has now resulted in the arguably-smartest political odds-makers around now favoring him to win over Jack Conway by a margin of almost 2 to 1. Not bad for the first week of the General Election campaign.
CNBC Features Intrade - Cashing in on the election
Monday, Aug 25, 2008
"It's your money, your vote and... your trade," CNBC's Scott Cohn takes a look at Intrade's, real money, prediction markets that "some political experts swear by."
The CNBC feature, aired on Monday 25th August 2008, discusses Intrade's ability to predict the outcome of the 2008 election.
"Trading volumes are five times higher this 2008 cycle, to-date, than for all of 2004" according to Intrade CEO, John Delaney. Justin Wolfers, of the Wharton School of Business (University of Pennsylvania), comments that small markets "end up yielding very accurate predictions."
The Wharton School of Business has found that Intrade has a margin of error of 1-1.5%. This margin of error is approximately half that of comparable Gallup Polls which has been a benchmark of accuracy in predicting the outcome of US presidential elections for many years.
Can the Intrade crowd predict the election? Some say volumes are too small, others say it predicted 50 states correctly in 2004 and with over $100m traded on US Politics this election cycle so far. "Maybe, these virtual crowds really are wise."
Absolute accuracy aside, Intrade seems to predict better than many others and gives a real-time snapshot of market sentiment 24/7.
Some latest numbers on the Kentucky Senate race.
Now all he has to do is stop going on national shows unless he goes on talk radio and focus totally on Kentucky Media.
After he gets elected, he can go on national TV and it won’t matter as much.
It was a tactical error to go on CNN and MSNBC for a Kentucky election...risk reward doesn’t match.
I agree, completely. I think your analysis is correct.
He was smart enough to screw up early when time can soften the downside later.
I still think he is almost as nutty as his dad (this incident certainly strengthens that), but not so much as to take him out of the running.
Yeah, that was one silver lining I saw, as well.
If you're determined to just plant your face right in somebody's fist, best to bloody your nose early so you can come back swinging.
Seems to me if he straightens out now he’ll be OK. Hope this was a learnable moment.
<<If you’re determined to just plant your face right in somebody’s fist, best to bloody your nose early so you can come back swinging. <<
Excellent analogy LOL!
Congrats to Kentucky and Kentuckians for not listening to the Liberal media...or its RINO GOP panderers....as they attack Rand Paul.
They are not gaffes if it makes your campaign stronger.
Yes, and yes. We hope.
Gallup hasn't been the benchmark for polling accuracy for years. Rasmussen has been far more accurate than Gallup. How can a so-called professor do a study and then use an inaccurate benchmark as a gauge of anyone’s accuracy?
Regardless of which benchmark you prefer (and I'm not disputing Rasmussen's superiority), it's nonetheless true that Intrade's 1 to 1.5% Margin of Error is very, very low. It's competitive with the very best polling.
Well, Rand Paul did take a hit in the Intrade markets the day of the Maddow interview; but he has come roaring back, and fast.
So why do we assume the “smart” money does the right thing on Intertrade.
What if this is the dumb money taking a position?
Just like a poll, the Intrade Prediction Markets can only tell you what is "the mood of the market" on that given day. Right now, that Market (a market made up of self-interested bettors, regularly evaluating election news) is valuing Rand Paul's expected chance of wining at 64% -- which is great, but I hasten to add that it's definitely not the same as 100%, y'know? We still have to win this thing.
But it is good news nonetheless, because as a "a real-time snapshot of market sentiment 24/7", Intrade's margin of error is at least as low as some of the best traditional polling out there. It's encouraging.
Ahem: “winning”, that is, not “wining”. I have no idea what sort of wine Rand Paul prefers.
If Intertrade is a futures or options market, how do we know whether the “big” money is buying or selling those positions?
Because there's really not that "big" of money in Intrade for a "Big Money" player to go after; the whole company only brokers maybe a few hundred million dollars in bets a year on all US Political Races, combined.
The total size of the market in the Kentucky Senate Race is only 800+ Contracts so far, no larger than a good-size Poll at this time (although that number will increase as more contracts are traded as the election draws nearer). There's really no way for "big money" to take a position; they'd push up the price too fast and not have a positive risk-reward ratio against the chance that Conway might just win, and they'd lose all their high-priced Rand Paul bets.
In that respect, it's a fairly efficient self-correcting market.
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