September 2, 2008

Palin on Intrade

Intrade has added trading on the likelihood of Palin being withdrawn as the VP nominee.

Price for Sarah Palin to be withdrawn as Republican VP nominee/candidate at

Via Joshua Green who ponders the Eagleton Scenario just as I did Saturday morning.


Pomeroy Kinsey said...

It reached 20% as of 6:30 last night. Wonder what was pushing it up. The Bristol pregnancy?

Pomeroy Kinsey said...

The trend over the last 24 hours on that contract has been up and down between 10 - 20%. At worst, it says the market doesn't expect her to withdraw. And there's a been fair amount of trading (over 4000 trades, but I'm not sure how many really is 'alot' since even 4000 is pretty compared to traditional futures {again, I think - I study sex and crime so I'm out of my element here Donny!}).

What does he stand to really lose though by keeping her in the race? He's already going to lose. The guy is a longshot in this campaign, so that's why it was right to go with Palin. The downside is she can't hurt him anymore than he's already hurting. The upside, she might actually be extremely valuable for the ticket. So it's win-win for McCain. So far, she's rapidly become extremely popular. And the scandals around her seem pretty mild. They are either that she is an extreme conservative on social issues and governance, or that she's got a pregnant teenage daughter. The things about the firings in her home state may turn out to be bad, but so far they are being eclipsed by these other things in the news.

Besides, I've been going over the intrade state-by-state contracts, and the states that are potentially at play are not states that she really can affect either way. It's Ohio, Colorado, Nevada, Viriginia and one other I'm forgetting that are going to decide the election, and McCain has to win all five to win. If he loses even one, he loses. And these are states with really economic problems right now. Nevada, Virginia and Ohio all have extremely high foreclosures or unemployment, and Nevada has been experiencing a demographic shift for a while as Californian young professionals have been migrating there and changing the political composition of the electorate towards Democratic.

So, all I can imagine is that Pilan is on the ticket to strengthen the base and ensure victories in those solidly Republican states (which she does), be extremely attractive in various superficial ways (which is also, I think, the appeal of Obama - he also has a certain amount of charisma that makes him attractive in topical ways). Both of those allow McCain to focus on the swing states, where I actually think McCain's strengths and appeals lie. He is a moderate/centrist. He could be attractive in those areas afflicted with hard foreclosure and unemployment problems, but he's got to get a message together that is aimed towards those states. I just don't hear anything yet.

J said...

i wonder if it spiked because if anything was going to happen it had to happen before the convention got rolling in truth last night but it didn't so now they're all in . . . . i think i'm repeating myself here at some point but the more i think about it is that mccain and company are hoping that the palin choice mobilizes the conservative evangelical base so that they not only come out but they come out big (in that regard all this hubbub over her family and kids will only help that cause as it gives them someone to rally to defend), particularly in those five states in play - so big in fact that it puts votes in play that the percentages weren't taking into account. the problem there is that obama has mobilized his base so well and that even a massive turnout of the party faithful for mccain won't carry the day . . . or something like that . . . in short, i wonder if mccain has given up on the margins and is just hoping that demographically there are just more republicans out there who will rise up and carry the day, sounds unlikely though . . .

while i'm prognosticating, i'll go ahead and predict that palin slays them tonight at the convention - seen in the wake of all the dreary old white men from the night before she's going to have them eating out of her hand.

a conversationalist said...

As someone who knows nothing about Intrade, and will defer to those among us who are somewhat "in to number and research" how accurate are these election-type issues seen to be? This seems alot like Ubuntu, if you like open source and are tech savvy, you know what it is. If you are the vast majority of the worlds population, you have no idea what it is. Given that Intrade would have to be the playground of the middle-class tech savvy American, is this a pretty good way of forecasting things? Or is it simply a way of telling how that slice of the population feels (a slice that, because of how plugged in it is, is usually already accounted for)? Not trying to cast any doubts, just being curious.
Speaking of the Palin issue, I have used the pretense of fleeing a major storm to infiltrate a stronghold of conservative belief. Palin is a go and I mean big time. The whole pregnancy thing, amazingly enough, has sealed the deal. This isn't America X-number of years ago. Most families have been affected by a teen pregnancy at some point and can be sympathetic. Just about everybody can get behind how unfair this is to the kids. I will be curious as to how many connections will seriously be made, as opposed to satirically made, to her stance on reproductive issues and this episode. What I am hearing is related to the "keeping of the baby" and the forthcoming marriage, as opposed to how someone of such firmly held beliefs on birth control/abstinence might feel about a teenage pregnancy in her own family. Granted, I have a small sampling group here, but if tradition is any indicator, most of this talk comes straight from the Limbaugh/Hannity playbooks. All in all, if this is the crux of the naysayers, it looks like they would be silly to ask her to step down.

Pomeroy Kinsey said...

conversationalist - I'm not an expert on prediction markets at all, so take what I say with a grain of salt. I don't even follow the literature from a distance. I follow the literature from a distance, filtered through bloggers who follow it from a distance or who themselves are researchers in the area. I know that in 2004, I did the same thing I'm doing now, which is take the state-by-state contracts on inTrade and see how their predictions fared in Bush vs. Kerry. From months back before the election, I have a memory of either every state going the way inTrade traders predicted, or nearly every state (I don't remember exactly; I once blogged about it, but I think that disappeared down the wormhole somewhere).

Here, though, is a paper summarizing their accuracy in presidential races. Traders have been betting on presidential outcomes for over a century, just as they've been doing with countless other events that are clouded by uncertainty, but which have economic implications.

The idea of the futures markets doesn't depend on what people are feeling, though. Rather, people are basically taking bets from one another that pay out (in inTrade's case) at $10. The assumption in futures markets is that traders collect information through whatever way they can, and then use that information to make bets. The contract price that floats, therefore, actually contains the information. So the idea is that all the feelings and hopes and beliefs that are swirling around people's minds are getting transmitted through greedy traders trying to make money on bets, and the price that ends up materializing can be used to "back out" a probability. Since inTrade sets the payout at $10 per contract, the price basically functions like a probability. So, for contracts selling at $52, like one of the swing states (can't remember which one), that means if the state goes to McCain, and you owned that contract, you'd win $10. If it went to Obama, you'd have to pay out, because someone is taking the other side of that bet. If you thought he had, say, a 50% chance of winning, then you should take the other side of the bet, because you're basically saying that your private information leads you to believe the contract is actually priced too high. In fact, you should keep buying the contract at that price so long as your expectation differs from the price. So long as you have enough money to cover the bets, you keep buying - but as you keep buying, you're gradually pushing the price down til it reaches 50%, at which point you stop.

All that to say, futures markets consistently outperform polls. InTrade has had Democrats winning this race since even before they knew it was Obama who was on the ticket, and before they knew it was McCain too. Traders, driven by the desire to make money, thought Dems would win this year, regardless of the appeal of the individual candidates.

Prediction markets do an especially good job of out performing polls months back from the night of election, too. On the night of election, they tend to go haywire. There were crazy fluctuations in the Bush contract in 2004 as early exit polls showed him losing in key states. They then learned the exit poll data wasn't weighted properly, and he was actually doing fine in those states, and of course later did a big sweep of the states and won. Had you just listened to polls, though, you would've never known what was going on.

I trust the people putting their money where their mouths are more than the people who are just speculating in stuff like this.

Pomeroy Kinsey said...

J - That image is different. Is that somehow an embedded intrade contract that changes? How'd you do that if so?