Tyler Cowen and Mike Linksvayer discuss the somewhat confusing reaction of Bush wins futures to the first debate.

I have some different theories about what might have happened. The size of a typical trade seems to be a few hundred dollars or less, so the typical reward for being quick to exploit inefficient prices is probably in the $10 to $30 range. It’s fairly easy for me to imagine that the most sophisticated traders value their time enough that such rewards don’t cause them to react quickly. I’ve been making a small but steady return from fairly regular trades on Tradesports the past few months, but I only log in about once every two days.

Another possibility is that the best informed traders get their information by talking to undecided voters over several days after the debate.

Either way, as an experienced investor it doesn’t surprise me that markets are slow to react to information that isn’t very clear. Markets often show more frequent patterns of prices following a trend than I would expect from random behavior. I interpret this as evidence that some information gets reflected slowly in those prices. That doesn’t mean it’s possible to get rich by any simple trend following rule – enough of those trends are false signals created by traders trying to exploit the naive trend follower that it’s hard to get useful information out of the trends unless you combine it with good information about what the efficient price should be.