The Clinton win in New Hampshire wasn’t only bad for Obama, its also given commentators an opportunity to knock prediction markets. New York Times has a go, as does Slate.

The problem is when the commentators read the markets and deduce that the market is predicting the favorite is the one that will win. However, the great thing about markets is they state the probability with which they make their predictions. And Obama with a 90% chance of winning means that one in ten times he won’t. Desert Vision won the 3:40 at Musselburgh this afternoon. The odds where 25/1 implying around a 4% chance. Does that mean the market was wrong? No, 25/1 shots tend to win around 1 in every 25 races (actually a bit less often due to the bookmakers margin). That just happened to be one of those races.

Basically, the ‘prediction markets where wrong’ commentators are like a bunch of punters at the race track complaining that the market wasn’t right every time the favorite doesn’t win. (In fact they should go to the race track for a probably expensive but very educational day out!)

Chris Masse is diligently following the story at Midas Oracle and the Silicon Alley Insider gives a nice analysis. Of course the only way to measure whether markets are accurate is to look at them over a number of events. Caveat Bettor is keeping the score on the primaries and it is prediction markets 3, Zogby 1 (with one 2-way tie and one 3-way tie).

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