"On election day 2004 bush was at about 20% at 8:00 PM EST on trade sports. Bad info in bad bets out.
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you are selecting a very narrow time frame impacted by unexpected data (exit polls) to make your point. Markets are not 'efficient' in the sense you expect. They always over-react, on the upside and downside, to news. In this case, you have a contract essentially hours from expiration and there is news in the media that a certain outcome will occur. Of course people will trade on that news.
The area of interest in these contracts is not in the last .1% of the contract life, but in the days and weeks prior to election. Another items of interest is total value of outstanding contracts, since the larger the value, the more accurate it is assumed to be. If it is only 10 million, I don't consider it a notable liquidity pool. Get it to 10 billion and it is much more noteworthy.
"On election day 2004 bush was at about 20% at 8:00 PM EST on trade sports. Bad info in bad bets out.
"you are selecting a very narrow time frame impacted by unexpected data (exit polls) to make your point. Markets are not 'efficient' in the sense you expect. They always over-react, on the upside and downside, to news. In this case, you have a contract essentially hours from expiration and there is news in the media that a certain outcome will occur. Of course people will trade on that news."
You miss the point he is making. People are wondering if the tradesports has some inside track that polling doesnt, yet this example showed that tradesports 'investors' were trading based on (incorrect) news.
Tradesports therefore is merely a regurgitation of expected election results based on public information on races.
"The area of interest in these contracts is not in the last .1% of the contract life, but in the days and weeks prior to election."
I don't see why it matters. A campaign looks to be winning, it's above 50. It gets bad news, it goes down.
I'm concluding that tradesports is just a shorthand for getting the same info you could get at realclearpolitics.com