{"id":18,"date":"2004-10-17T17:45:46","date_gmt":"2004-10-18T01:45:46","guid":{"rendered":""},"modified":"2010-06-13T18:25:29","modified_gmt":"2010-06-14T02:25:29","slug":"efficiency_of_presidential_election_futu","status":"publish","type":"post","link":"https:\/\/bayesianinvestor.com\/blog\/index.php\/2004\/10\/17\/efficiency_of_presidential_election_futu\/","title":{"rendered":"Efficiency of presidential election futures markets"},"content":{"rendered":"<p><a href=\"http:\/\/www.marginalrevolution.com\/marginalrevolution\/2004\/09\/who_won_the_deb.html\">Tyler Cowen<\/a> and <a href=\"http:\/\/gondwanaland.com\/mlog\/2004\/10\/04\/divided-attention-poor-judgement\/\">Mike Linksvayer<\/a> discuss the somewhat confusing reaction of Bush wins futures to the first debate.<\/p>\n<p>\nI 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&#8217;s fairly easy for me to imagine that the most sophisticated traders value their time enough that such rewards don&#8217;t cause them to react quickly. I&#8217;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.\n<\/p>\n<p>\nAnother possibility is that the best informed traders get their information by talking to undecided voters over several days after the debate.\n<\/p>\n<p>\nEither way, as an experienced investor it doesn&#8217;t surprise me that markets are slow to react to information that isn&#8217;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&#8217;t mean it&#8217;s possible to get rich by any simple trend following rule &#8211; enough of those trends are false signals created by traders trying to exploit the naive trend follower that it&#8217;s hard to get useful information out of the trends unless you combine it with good information about what the efficient price should be.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>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 [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[17,18],"tags":[],"class_list":["post-18","post","type-post","status-publish","format-standard","hentry","category-if","category-investing"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p80O1l-i","_links":{"self":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/18","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=18"}],"version-history":[{"count":1,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/18\/revisions"}],"predecessor-version":[{"id":367,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/18\/revisions\/367"}],"wp:attachment":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=18"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=18"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=18"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}