Tuesday, October 14, 2003

Reading prediction markets

I wrote about prediction markets recently and it might be worthwhile to go over how to read their numbers. This claim, for example, is about Bush winning in '04, and it gives him about a 54% chance. The bid is 53, ask 56, which I interpret as being (on average) about a 54% chance, with the spread between bid and ask being the cut the exchange takes to make its money. So, if you think Bush is going to lose for sure, you need to think he has below a 53% and you could take that side of the bet -- which would also lower his predicted chances. If you think he's going to win, you need to think he has above a 56% chance, which would raise his predicted chances. I'm going to sign up as soon as I have the chance, and give a more detailed account of what it's like. (Here's another competitive exchange)


Post a Comment

Subscribe to Post Comments [Atom]

<< Home