Meet the Best Forecaster Around: Intrade

Know about prediction-market Intrade? If not, you should. Why? Because it's the best forecaster around--business, economic, political, and other.

Yesterday, for example, Intrade predicted Obama and Huckabee would win in Iowa before any votes were cast (and long before the networks started screaming "irresponsible!" at each other for daring to venture the same conclusion).

How does Intrade work? The same way the stock-market works. It shows the consensus of multiple bets made by individual participants. As those who have studied wisdom-of-the-crowd experiments know, collective estimates are usually better than the estimates of most individuals (and sometimes all individuals).

This seems inconceivable to most smart people, who point out that the stock market and other prediction markets are often wrong. But the point is not that prediction markets are always right--they aren't. It's that their current estimate is the best available estimate at any given time, because it incorporates the knowledge, information, and relative skill of dozens of participants.

So what's Intrade predicting now?

-That the US will go into recession in 2008
-That the XMSR/SIRI merger will close by June
-That Hillary will win the democratic nomination (surprising)
-That McCain will win the republican nomination

Comments

[Robert59]

Not to toot my own horn, but.............

Hillary wins in New Hampshire

McCain wins in New Hampshire

Stocks dropped 250 points yesterday

If I were strategizing where Edwards should be focusing his efforts on are the Rust Belt states. Take Michigan.

And Americans may not believe it, but the truth is we are at a crossroads in this country and the only one addressing it is Edwards.

[cgreen23]

If I read it right, the stats for the last 36 hours or so in Intrade show Obama at about 65% probability and Hillary at 32%; or, a massive win by Obama.

In October, it was 75% Hillary and 10% Obama. Heck, as you point out, three days ago it showed Hillary winning.

I'm a big fan of markets, but frankly these results are about the mirror image of gaga newscasters, bloggers and op-eds around the country. I don't see any consistent, unique insight from Intrade--at least not on this example.

It looks more like another rage of the month popularity contest than a bond market, for example.

[degobah]

I'm no genius but...

Where is the correlation between someone willing to sign-up and actually pay - with real money - to trade on Intrade and the vast majority of the American electorate. I'm sure this works for the cloistered world of high finance, but for political prognostication it seems like a joke. I guess we shall see.

Degobah from So Cal

[castlerider]

They are believing Hill will win because she's bought her ticket. Kissed up and paid off. Might have worked in '92, but I think the internet changes everything.
I second the emotion, believe these guys are dead wrong.

[The Collinbrandt]

My dad died when I was young but, I remember that the company he worked for, Dow Chemical, made him give presentations on some theories he had for cost engineers. At one presentation someone from another chemical company said to him that "they had had very good results using his charts but, they were not as good as his results". My dad replied that "even with the math, you also had to use common sence". These statistics? cited in this article seem more like Nostradamus predictions.

[joebaggadonuts]

Today it's 49 Hillary and 51 Obama. Thanks for the link anyway, Henry. It's a cool site.

[cylindar]

Yeah well, I bet they are dead wrong on the Hillary thing.

[ReasonIsMyReligion]

I wouldn't have predicted zero comments in 7 hours and 46 minutes, but what do I know?

;-)