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Even when you have a market with immense amounts of liquidity, the market won't be efficient if all the participants are wrong. I remember back in 2012 InTrade
by hogFeast 5y ago
Even when you have a market with immense amounts of liquidity, the market won't be efficient if all the participants are wrong.
I remember back in 2012 InTrade had a market for the US Presidential election, the odds were wrong, stayed wrong for months, and actually got more wrong close to the event. You could get hourly liquidity in the tens of thousands almost throughout (I put on $20k in this market, I wasn't touching the sides, it was incredible).
Most of the people who talk a lot about prediction markets haven't worked in markets. Markets aren't magic. They work better with binary outcomes but they cannot be smarter than the people making bets in that market...and they aren't (I have most experience with financial markets, which just don't work well at all, but have quite a bit of experience with binary markets too...they have only become more accurate as our knowledge about the underlying events increased...if you look at binary markets where knowledge is limited in some way, markets are not efficient).
- RandomLensman 5y agoSeconded, predictive quality of markets is not at all a given. For example, financial markets can have real arbitrage opportunities in size open that no-one removes (if capital requirements are high/volatile) - so no unique predictive state then
- AvAn12 5y agoYes that's right. The price of a futures contract is not a prediction of the price of the underlying commodity in the future. It's simply today's clearing price between hedgers and speculators. If a hedger feels they are underhedged, they are going to buy (or sell) more of the futures contract until they feel safe, and won't really care about the impact on price of their hedging action. Likewise, speculators can bid prices way up (GameStop?) with little regard for fundamental value today or in the future. It ain't magic...
- amvalo 5y agoWrong how? Skewed R?
- hogFeast 5y agoFrom memory, Romney was close to even to win.