On?Thursday, I left you with my Oscar picks:
the only close race is Best Picture, and the markets give a slight edge to The Hurt Locker, over Avatar. The other awards are easier picks:?Jeff Bridges will be best actor;?Sandra Bullock will be best actress (as much as I disliked her performance in The Blind Side);?Christoph Waltz is a lock to win best supporting actor;?Mo’Nique will surely win best supporting actress; and?Kathryn Bigelow will beat her?ex-husband to win best director.
It’s time for me to confess: I’ve barely seen any movies this year, and know little about the industry.? But I didn’t want to get left out of the water-cooler conversations about the Oscars.? And so these forecasts were simply a fun application of prediction markets.? By quickly scanning the latest market prices, I managed to become an insta-expert.? In fact, I managed to become such an insta-expert that I’ll be returning to the water cooler today to gloat about my successful picks in all the major award categories.
You can try the same thing.? Can’t be bothered with college basketball?? Check out the prediction markets ahead of March Madness, and you can be sure that your bracket will at least look informed.? Politics bores you?? Forget Politico and FiveThirtyEight; simply follow the markets and you’ll be an insta-expert.? Having trouble tracking the economy?? Follow the futures.? In basically no time at all, you can become expert on just about everything.? It’s all about listening to the wisdom of crowds.
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. You can also watch it on 
Following futures instead of the cash stock market won’t be helpful in determining the state of the economy. The only differences between the spot SP 500 and the futures SP 500 are interest rates (futures are traded on margin) and dividends. Both of these are known, therefore the two move in tandem.
Reminds me of a story which may be apochrophal: a family takes a vacation in upstate New York and meets what used to be called an Indian.
One day the traveler gets to know the Indian chief and asks about tomorrow’s weather. The response, “Rain in the morning, clears up in the afternoon.” About 80 degrees at noon.
Right!
So, each day, the vacationer asks the Native American [PC] about the following day’s weather and the Indian chief is right about 90%. Amazing!
So, one day he askd the chief how he can prosnosticate so well?
“IListen to radio every day.”
Following my previous comments, a short technical critique of the strategy you encourage:
Prediction markets are basically odds makers. What you are doing is not extracting knowledge (much less expertise) on the matters, but engaging in information arbitrage. Your friends at the water cooler are not following the odds, so you can take advantage of your odds-based predictions; not with money in this case, but with prestige. If they were all looking at the odds already, then what would you have to add to the conversation?
I suspect most people discussing who is going to win the Oscars are really saying who they think *should* win the Oscars, not so much who is likely to win.
Do prediction markets necessarily encompass all available information? Let’s say I worked for PWC and knew all the results. I could just keep betting the line until I shifted it enough that it was no longer profitable to wager.
But that’s unlikely. I wouldn’t want to compromise my job, and don’t have that kind of money.
Maybe prediction markets aren’t the best way to make decisions. For instance, some real experts can beat the prediction market (spread) enough of the time to be profitable betting sports. Most of the good ones use statistical analysis. On the other hand, Nate Silver tried to use stats to predict the Oscars last year and was crushed by prediction markets.
As convoluted as this comment is, I am mostly just curious when prediction markets are better than statistical analysis and visa versa. Call is a Wolfers vs Ayres battle.
The thing is that the crowds these markets survey the wisdom of are not composed of schmucks off the street (or internet). It’s people who care enough to do research and put their money where their findings are. It’s a pool of experts. If every dopy message board reader sees where the market is and bets the ranch, the signal of the knowledgeable will become swamped by noise and the markets will be rendered useless.
@Michael That’s give of the point isn’t it? Prediction markets are a cheap way to dessminate expert opinion to the rest of us sheep. I actually have yet to see the definitive study on prediction markets being better than simple polls, but they are far from worthless.
Are there any sports prediction markets left? I haven’t seen any since tradesports.com died.
Hardly anyone was wrong about the Oscars this year. I’ve seen almost no movies this year either, didn’t look at the prediction markets, and I had all the right picks, too,