By Nigel (Chief News Junkie)
The United States Military Academy’s Department of Mathematical Science runs a weekly Problem of the Week. Last week was a really interesting problem involving making predictions on Hubdub! Unfortunately the deadline is now closed for entries however kudos to the first commentator who posts the correct answer below.
Hat tip to jenniandboys.
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By Nigel
Over the past three weeks Hubdub users have created some very funny and inventive questions. For example, ‘Will Dick Cheney bag another attorney this year when hunting at Armstrong Ranch?‘
However, what has provoked real discussion is the morality of questions like ‘How many American soldiers will be killed in Iraq in February 2008?‘ or ‘Will Britney Spears be alive on December 31 2008?‘
On the question of the morality of questions I’ve struggled to come up with what is the right answer. Fundamentally it feels wrong to profit (even virtually) from someone else’s tragedy. However, it would be strange for us to self-censor ourselves from making predictions about something professional journalists are already discussing and making predictions on.
One of the things that influenced me when we were developing the site was a comment made by the UK Secretary of Defence, Dr John Reid, when we were sending troops into Afghanistan. He said that ‘hopefully the troops would return without firing a shot’. Additionally, at the time it seemed there lacked any real national debate on why we were committing more troops to Afghanistan and what their objective was. The British Army is now fighting one of its most intense operations since Korea resulting in 82 British fatalties in the last 2 years.
Elsewhere prediction markets have shown the ability to be one of the best means of aggregating information and forecasting future events (and particularly better than politicians with a vested interest). I believe if we have a sufficient user base then we could not only have an accurate forecast of the outcome of these decisions but could also act as a forum for public debate on whether the decision was worth the cost. So while questions like this feel distasteful I think they could potentially have real social value.
However, those are my own thoughts. I’d really like to know where you thought was the line on this.
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By Donal
When Nigel first pitched the idea of Hubdub to me, one of my immediate reactions was; “this will be great for the NFL off-season”. The coaching changes, free agency, trades and most importantly: the NFL draft. With a dramatic Superbowl XLII in the books, now is the time to find out.
For an event whose appeal owes much to our efforts at forecasting its outcome; prediction market sites devote surprisingly little attention to the NFL Draft. Perhaps this lack of coverage is attributable to the more established practice of forecasting the 1st round of the Draft in its entirety; something the prediction market model doesn’t really cater for. But there is so much going on in the draft, it offers the potential for many interesting prediction markets.
Just drawing on previous experience, here are a few that come to mind:
At Hubdub, connecting these markets with their associated news flows and tracing news reports to outcome percentages over time adds an extra dimension of interest. Just imagine how dramatically this would have worked in a “Who will the Texans pick” market the day before the 2006 Draft.
Plus, at Hubdub, aspiring Draft Gurus will have the accuracy of their predictions reflected in their $ gains (or losses). Unlike certain other Draft forecasters, there won’t be a rush to obfuscate a slew of inaccurate predictions by immediately grading the selections of every team (I’m sure there is someone who gave the Chargers an A grade back in 1998).
So although we at Hubdub are looking forward to March Madness, a new MLB season and the business end of the NBA season, we are pretty excited about the NFL Draft. I’m sure there will be a lot of interesting markets and hopefully we will find a number of Draft Gurus amongst the ever expanding Hubdub membership.
We will be announcing more on our coverage of the NFL Draft shortly… …in the mean time check out the Hubdub sports category for the top open sports markets.
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By Nigel
Wow, what an amazing week. Lots of really great press coverage (did anyone see us on TV on Channel 19 in Charlottesville or on listen to us on Houston radio?) and an amazing in-running market on the Super Bowl yesterday. Thanks to everyone for there support.
Last night a new prediction market launched. If you were dotcomming back in 2000 you will have fond memories of The Industry Standard. Well they are back, and this time as a technology prediction market.
I’ve taken a look and I’m being asked by some journalists for comment. I’m torn between damning them with faint praise and making a couple of snarky comments. Secretly I do like the idea of competing against Guy Kawasaki but I’ve noticed some of their questions are a bit vague (which I’ve heard can cause problems :-).
But I thought it would be better to ask the experts, which is you (with the added benefit you are independent). So what you think? Will the ‘Hubdub to flame out’ market soar? Will someone create a ‘The Industry Standard to tank’ market and at what odds? Should I get my resume out?
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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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Prediction market, Intrade, topped the pollster Zogby in predicting the winners of Iowa’s caucus. The forecast taken last night at 9:30 EST shows Obama and Huckabee having clear leads on Intrade. Zogby however while forecasting a Huckabee win couldn’t separate Clinton and Obama (putting both at 28%). Interestingly, neither suggested that Clinton would end up in third place.
Onward to New Hampshire where Obama is favorite on both Intrade (67%) and Betfair (59%) to win the state. John McCain, who appears to be one of the surpising winners of Iowa, has seen his forecast probability of taking New Hampshire has shot up from around 40% to 71% over the past couple of days (Intrade).
Overall, Clinton still remains favorite to gain the Democratic nomination, but only by a sliver (52% on Intrade, 53% on Betfair). For the Republicans, John McCain has now become the front runner for the nomination (32% on Intrade, 29% on Betfair). Despite last night’s win Huckabee trails in third position on a forecast on both exchanges of 16% chance of getting the nomination.
For all you Paulites, both exchanges are forecasting around a 5% chance of Ron getting the nomination.
For me, I’ve got a tenner on Obama to get the Democrat nomination. For him to get such a resounding win in a rural 95% white state I think indicates the strength and breadth of his appeal.
Hat tip to Caveat Bettor.
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The Wall Street Journal has an excellent article today by Professor Justin Wolfers on Using Markets to Handicap Iowa. Obama is the favorite to win the Democrat vote with Romney and Huckabee neck and neck for the Republicans. Justin Wolfers shows that the markets are an excellent guide to election season.
But steady on says Brett Arends, also at the Wall Street Journal. He notes:
Markets are fascinating. I’m as absorbed by political betting as I am by the stock market — right now, maybe, more so. The prices tell stories. They contain wisdom and folly, clues and surprises. Respect them, by all means. But don’t revere them. The “crowd” isn’t always right.
Both authors note some drawbacks with the current markets (low liquidity and potentially absence of smart money). Either way the election kicks off today and it is going to be one exciting race.
Hat tip to Midas Oracle.
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Yahoo! have just launched a really cool dashboard for the 2008 Presidential Election. It presents data from polls, Yahoo! buzz index and Intrade (an Ireland based prediction market). If you are a rabid passionate Ron Paul supporter I suggest you don’t look at it, they’ve stuck him on page 2!
Coverage on TechCrunch.
Nigel
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