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This all really depends on the efficiency of the market. I think these prediction markets would claim that is their goal, but even Wall Street isn't perfectly

by slg 6mo ago

This all really depends on the efficiency of the market. I think these prediction markets would claim that is their goal, but even Wall Street isn't perfectly efficient. I would also guess that sports betting sites like DraftKings or FanDuel would be even less efficient and less likely to be swayed by a popular GitHub repo. Once again, it goes back to the share of the market that is participating for entertainment purposes. That's a lot more common for sports betting than it is for will the US bomb a certain country.

dheera 6mo ago
> but even Wall Street isn't perfectly efficient. Yes, you can find positive EV trades on Wall Street as well. I've been diving into this a lot lately, all I can say is it's 10X harder to find strategies that work on Wall Street than prediction markets. With one exception. The one easy long-lasting anomaly to exploit on Wall Street which actually does NOT exist on prediction markets: "American stocks go up most of the time". This is actually a massively exploitable structural anomaly (you just buy and hold forever and effectively reap the rewards of a biased coin) and the source of the anomaly is mostly US monetary policy, US foreign policy, and US tech expertise put together. However, it still is an anomaly. The thesis that SPY will continue going up forever is also predicated on these things continuing to work the way they have in the past.
- tempestn 6mo ago
  How is it an anomaly? Global stocks go up (or at least have positive total return) over time on average because companies produce value. Ultimately it's true that that money has to come from somewhere, so you can say printing it is monetary policy, but the reason it can be done without runaway inflation is the tangible value produced by the firms.
wavemode 6mo ago
> I would also guess that sports betting sites like DraftKings or FanDuel would be even less efficient Your strategy doesn't work on sportbooks to begin with, because bookmakers don't move the odds with the action. That is, there is no such phenomenon as "the over is exciting therefore overpriced". Bookmakers price purely based on facts and statistics. Their pricing isn't affected by excitement nor by how many people are betting a certain way.
- slg 6mo ago
  >Bookmakers price purely based on facts and statistics. Their pricing isn't affected by excitement nor by how many people are betting a certain way. If this were true, lines would never move unless there was breaking news, but we see lines move all the time without there being any material change to those "facts and statistics".
  - dheera 6mo ago
    I think the distinction is that sports betting companies are basically casinos, need to guard their edge, and although they will tolerate some moving of lines, they will kick out players who consistently eat their edge, and will rig the lines at a place where they can still profit. Different from a prediction market like Polymarket or Kalshi whose income probably comes mostly from transaction fees rather than house edge. Otherwise these platforms wouldn't welcome bots so much. Bots => efficient pricing + transaction volume => profit for them
    - slg 6mo ago
      These are all reasons supporting my point as they would make sports betting platforms less efficient meaning it would be easier to find arbitrage in their prices (at least temporarily, until you're booted for being too successful).
    - mind_orbit 6mo ago
      The sustainability of prediction markets depends heavily on continuous liquidity provision - without bots and market makers, spreads would widen and user experience would degrade quickly
  - wavemode 6mo ago
    > without there being any material change Without there being any material change you can see. If you had access to all the tips and data and insider information that sportbooks operate with, you could be a bookmaker too.
    - 6mo ago

by slg 6mo ago

dheera 6mo ago

> but even Wall Street isn't perfectly efficient. Yes, you can find positive EV trades on Wall Street as well. I've been diving into this a lot lately, all I can say is it's 10X harder to find strategies that work on Wall Street than prediction markets. With one exception. The one easy long-lasting anomaly to exploit on Wall Street which actually does NOT exist on prediction markets: "American stocks go up most of the time". This is actually a massively exploitable structural anomaly (you just buy and hold forever and effectively reap the rewards of a biased coin) and the source of the anomaly is mostly US monetary policy, US foreign policy, and US tech expertise put together. However, it still is an anomaly. The thesis that SPY will continue going up forever is also predicated on these things continuing to work the way they have in the past.

tempestn 6mo ago
How is it an anomaly? Global stocks go up (or at least have positive total return) over time on average because companies produce value. Ultimately it's true that that money has to come from somewhere, so you can say printing it is monetary policy, but the reason it can be done without runaway inflation is the tangible value produced by the firms.

wavemode 6mo ago

> I would also guess that sports betting sites like DraftKings or FanDuel would be even less efficient Your strategy doesn't work on sportbooks to begin with, because bookmakers don't move the odds with the action. That is, there is no such phenomenon as "the over is exciting therefore overpriced". Bookmakers price purely based on facts and statistics. Their pricing isn't affected by excitement nor by how many people are betting a certain way.

slg 6mo ago
>Bookmakers price purely based on facts and statistics. Their pricing isn't affected by excitement nor by how many people are betting a certain way. If this were true, lines would never move unless there was breaking news, but we see lines move all the time without there being any material change to those "facts and statistics".
- dheera 6mo ago
  I think the distinction is that sports betting companies are basically casinos, need to guard their edge, and although they will tolerate some moving of lines, they will kick out players who consistently eat their edge, and will rig the lines at a place where they can still profit. Different from a prediction market like Polymarket or Kalshi whose income probably comes mostly from transaction fees rather than house edge. Otherwise these platforms wouldn't welcome bots so much. Bots => efficient pricing + transaction volume => profit for them
  - slg 6mo ago
    These are all reasons supporting my point as they would make sports betting platforms less efficient meaning it would be easier to find arbitrage in their prices (at least temporarily, until you're booted for being too successful).
  - mind_orbit 6mo ago
    The sustainability of prediction markets depends heavily on continuous liquidity provision - without bots and market makers, spreads would widen and user experience would degrade quickly
- wavemode 6mo ago
  > without there being any material change Without there being any material change you can see. If you had access to all the tips and data and insider information that sportbooks operate with, you could be a bookmaker too.
  - 6mo ago