Are the gamblers behind the curve?

[ChristinaB]

We have all seen the Bush bounce fizzle to an essentially even race. So why haven't the gamblers adjusted?

Iowa Election Market (http://128.255.244.60/graphs/graph_Pres04_WTA.cfm)

Pinnacle (http://www8.pinnaclesports.com/guestcontestLines.asp?redirected=yes&ContestType=P olitics)

Tradesports (http://www.geekmedia.org/tradeSports/)

[Utah]

Gamblers are never behind the curve. People betting their money is always a better indicator than polls or pundits.

I would trust the gamblers every time.

[Clarkmeister]

[ QUOTE ]
Gamblers are never behind the curve. People betting their money is always a better indicator than polls or pundits.

I would trust the gamblers every time.

[/ QUOTE ]

yup

[sfer]

You can't beat money as an incentive to get something right.

[Knockwurst]

or Oscar De La Hoya beating Shane Mosley twice. Oh, uh, never mind. /images/graemlins/blush.gif

[sfer]

The line doesn't have to be correct 100% of the time for it to be, ex ante, the best representation of the likely outcome.

[Utah]

Just to add, this is not pure speculation.

The validity of the accuracy of the gambler's prediction has been shown through experiment and it is really the foundation of the efficient market theory of the stock markets.

There is a fantastic story about the power of gambling in the book Blind Man's Bluff (by Sherry Sontag and Christopher Drew). The U.S. had lost a sub called the scorpion to a disaster and they were trying to locate the sub. They used every model they could to find it with zero luck after months of searching. A man named Craven used Bayes Theorem of subjective probablity to find the sub. He had people in the search place actual bets (bottles of Chivas Regal) of the various things that might have happened to the Scorpion: speed, location, glide path, etc. Through this "betting" system, they pegged the sub to within 220 yards (1/8 of a mile) and at a location completely at odds with the "experts". It showed the power of betting

[Knockwurst]

As I'm sure you are aware, a line merely represents the consensus opinion of gamblers of the likely outcome of a particular event. Though I'm not a handicapper myself, it is known that many factors may affect the line, including many non-relevant factors such as sentimental favorite, hometown favorite, etc. More importantly, the line is usually, if not always adjusted, based on the amount of money that comes in on a particular side. So that the line does not necessarily reflect the actual odds of an event, as calculated by the professional handicapper, but reflects in part the amount of money coming from the non-professional gamblers.

[ChristinaB]

[ QUOTE ]
You can't beat money as an incentive to get something right.

[/ QUOTE ]

You guys are shoveling BS here.

If putting your money up was incentive enough to be fairly accurate in your betting patterns, then we couldn't make money at poker.

Those chasing calls and impossible bluffs cost people a ton of money (their own money) and they don't seem to care.

Most gamblers on elections lose money just as they do at poker. Get serious.

I'd like to know how good a predictor these lines are, but you are seem to think they reflect "a perfect market". BS.

Anyone want to give a more realistic answer?

[adios]

Before I get started the betting line could represent that the "smart money" was on Kerry and the "dumb" money was on Bush. Not saying it does though. The bigger the favorite the more likely they are to win though.

You wrote:

[ QUOTE ]
If putting your money up was incentive enough to be fairly accurate in your betting patterns, then we couldn't make money at poker.

[/ QUOTE ]

A non sequiter. The analagous poker situation would be to handicap two players in a freezeout in a heads up match starting with an equal number of chips, etc. Another analagous situation from gambling that may support your point is regarding the point spread in football lets say. If the line was never off, you'd never have a profitable bet.

[ QUOTE ]
Those chasing calls and impossible bluffs cost people a ton of money (their own money) and they don't seem to care.

[/ QUOTE ]

This has some relevance, if the odds don't reflect the real liklihood of the outcome then this applies FWIW.

[ QUOTE ]
Most gamblers on elections lose money just as they do at poker. Get serious.

[/ QUOTE ]

Another non sequiter and actually disproves your point. If the odds are correct, then nobody wins but the linesmaker.

[ QUOTE ]
I'd like to know how good a predictor these lines are, but you are seem to think they reflect "a perfect market". BS.

[/ QUOTE ]

If you can prove that the lines are exploitable you should make a ton of money and you won't be telling us how you figured it out. As a predictor of the outcome it's probably a good one. The difference with what other posters have stated and what I think your point is that the true odds of Bush winning are say -120 instead of say -150. He's still the favorite but not by as much as the odds indicate.

[Clarkmeister]

Well, if the line is that bad, then you should be quite willing to bet a sizeable amount of money on Kerry at +180, correct?

[adios]

No offense but what you state in your post is not addressing sfer's point or what I perceive it to be. And that point is that the betting favorite wins more often than they lose.

[sfer]

I don't disagree that the line can be wrong. But given that money is a powerful incentive and that it is easy to access and exploit imperfections (i.e. by betting), it is the collective best guess and I would trust it more than polling.

[sfer]

[ QUOTE ]
Well, if the line is that bad, then you should be quite willing to bet a sizeable amount of money on Kerry at +180, correct?

[/ QUOTE ]

This is the whole point. If it's wrong, fine, but "experts" (read, people who can read polls) should be exploiting this all day. The fact that the line is what it is suggests that either (1) they're not or (2) people don't believe the polls as accurate enough to risk money.

[Knockwurst]

Actually, the efficient market hypothesis is very controversial, and far from universally accepted. I've posted a link briefly summarizing the theory, and its controversial nature.

http://www.investopedia.com/university/concepts/concepts6.asp

Also, I don't think the USS Scorpion story is anything but an amusing anecdote, especially because the opinions incorporated in the graph were apparently provided by non-experts.

[sfer]

The efficient markets hypothesis and it's corollary (arbitrage free pricing) is the implicit basis for pricing all derivatives. It's really not controversial.

[Utah]

[ QUOTE ]
Actually, the efficient market hypothesis is very controversial, and far from universally accepted. I've posted a link briefly summarizing the theory, and its controversial nature

[/ QUOTE ]

Respectfully, it is universally accepted. Is the market 100% efficient? No, and I dont know anyone who argues that. However, it is extremely efficient.

Lets take the link's example of technical analysts. Lets say that there is an aberation of the efficient market theory that allows a technical analyst to take advantage of the market. What happens? Well, that technical analyst helps set the market to the correct efficient point. If not, technical analysts would be Billionares as they could simply find inefficiencies and exploit them to no end. Also, with today's massive computing systems I am guessing life is very hard of technical analysts as those "blips" in the markets are more easily seen and there are a million computers that will pounce of them forcing the market to self correct.

[ QUOTE ]
Also, I don't think the USS Scorpion story is anything but an amusing anecdote, especially because the opinions incorporated in the graph were apparently provided by non-experts.

[/ QUOTE ]

Its was the experts who were placing the bets. However, I dont think it would matter if non experts were involved. However, if experts were not included you would have a problem.

[Knockwurst]

You are 100% wrong on that sir. To say it is not controversial, makes me question your knowledge of the subject. Please read the following:

An issue that is the subject of intense debate among academics and financial professionals is the Efficient Market Hypothesis (EMH). The Efficient Market Hypothesis states that at any given time, security prices fully reflect all available information. The implications of the efficient market hypothesis are truly profound. Most individuals that buy and sell securities (stocks in particular), do so under the assumption that the securities they are buying are worth more than the price that they are paying, while securities that they are selling are worth less than the selling price. But if markets are efficient and current prices fully reflect all information, then buying and selling securities in an attempt to outperform the market will effectively be a game of chance rather than skill.

The Efficient Market Hypothesis evolved in the 1960s from the Ph.D. dissertation of Eugene Fama (link courtesy of Ibbotson Associates). Fama persuasively made the argument that in an active market that includes many well-informed and intelligent investors, securities will be appropriately priced and reflect all available information. If a market is efficient, no information or analysis can be expected to result in outperformance of an appropriate benchmark. 1


"An 'efficient' market is defined as a market where there are large numbers of rational, profit-maximizers actively competing, with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants. In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future. In other words, in an efficient market at any point in time the actual price of a security will be a good estimate of its intrinsic value."

Eugene F. Fama, "Random Walks in Stock Market Prices," Financial Analysts Journal, September/October 1965 (reprinted January-February 1995). One of Fama's recent papers (Market Efficiency, Long-Term Returns, and Behavioral Finance at the Social Science Research Network in Adobe Acrobat format) is one of the most popular investment downloads on the web.

The random walk theory asserts that price movements will not follow any patterns or trends and that past price movements cannot be used to predict future price movements. Much of the theory on these subjects can be traced to French mathematician Louis Bachelier whose Ph.D. dissertation titled "The Theory of Speculation" (1900) included some remarkably insights and commentary. Bachelier came to the conclusion that "The mathematical expectation of the speculator is zero" and he described this condition as a "fair game." Unfortunately, his insights were so far ahead of the times that they went largely unnoticed for over 50 years until his paper was rediscovered and eventually translated into English and published in 1964. (See Peter Bernstein's Capital Ideas for more on these topics.)

investorhome.com

[sfer]

I price derivatives for a living.

EDIT: Obviously, you will believe what you want to believe, but don't question my expertise. I work in finance. The data and the applications are there for anyone to see. Every large financial institution implicitly believes in efficient markets. So does the Fed. So does the Treasury.

[Utah]

Damn - you made me break out my Brealey Myers Principles of Corporate Finance (which was the standard when I went to B School). I used to do this stuff for a living when I was a senior capital analyst for a fortune 500 company. I miss it and I am a little rusty. LOL

Yes - you are absolutely correct about arbitrage free pricing. However, I would argue that there is no such thing as pure arbitrage free pricing and there are anomolies in the market.

At first, I thought you were talking about arbitrage pricing theory, which is a different bird all together and deals with risk factors affecting stocks.

[Utah]

[ QUOTE ]
then buying and selling securities in an attempt to outperform the market will effectively be a game of chance rather than skill.


[/ QUOTE ]

CORRECT!!! Thats why the monkeys throwing darts can beat the experts on a short enough time horizon

[ QUOTE ]
The random walk theory asserts that price movements will not follow any patterns or trends and that past price movements cannot be used to predict future price movements

[/ QUOTE ]

CORRECT!! It cannot. Lets assume that it could. People would recognize that pattern and act accordingly. This would wipe out the pattern and return the stock to a random walk.

[tanda]

The race is not even.

Every poll, but Harris, has Bush ahead. Some by double digits. One poll for Kerry by one point does not make an even race. Rasmussen reported a surge for GWB in today's poll.

Almost all state polls have trended for GWB, particularly in battleground states.

The major electoral map services all have Bush ahead. A month ago, he was behind in all.

Kerry's people admit they are behind, probably by mid single digits.

Also, the candidates are campaigning much more in blue battleground states (MN, WI, MI, PA, etc.) as the red states are becoming out of reach.

Other than arguably Colorado, there is no Bush 2000 state that is in Kerry's column. Bush is leading in the blue states of WI and maybe PA.

The betting markets are consistent with the polls.

[Knockwurst]

True, but the line will not necessarily accurately reflect the liklihood of an event. For example, if Bush is a 2:1 favorite, that does not mean necessarily that the handicappers believe that there is a 67% probability of his winning the election. The line also reflects the non-experts opinion, particularly the non-expert who puts a lot of money on one side or the other.

My understanding is that if some event has a line of 10:1 and let's say $50,000 is the only money put on the event happening with no money on the other side. The odds will be adjusted, perhaps even making the other side the favorite, until the money is even on both sides.

[mmbt0ne]

[ QUOTE ]
[ QUOTE ]
You can't beat money as an incentive to get something right.

[/ QUOTE ]

You guys are shoveling BS here.

If putting your money up was incentive enough to be fairly accurate in your betting patterns, then we couldn't make money at poker.

Those chasing calls and impossible bluffs cost people a ton of money (their own money) and they don't seem to care.

Most gamblers on elections lose money just as they do at poker. Get serious.

I'd like to know how good a predictor these lines are, but you are seem to think they reflect "a perfect market". BS.

Anyone want to give a more realistic answer?

[/ QUOTE ]

Is this the realistic answer you want?
The bettors are morons. Everyone knows that it's just a bunch of rich people with too much time on their hands purposely influencing the line so that we forum-dwellers can have something to discuss. In fact, seeing all these people put money on Bush actually confirms my belief that more people like Kerry and he will obviously win the election.

[Matty]

[ QUOTE ]
Gamblers are never behind the curve. People betting their money is always a better indicator than polls or pundits.

I would trust the gamblers every time.

[/ QUOTE ]Yeah, like the Lakers-Pistons Finals ...

I think the Pistons had to manhandle the Lakers 2 or 3 games before they became the favorites.

[BeerMoney]

From what I understand, gov't officials considered using bookies and gamblers to predict when the next terrorist attack would occur, because historically, they have been the most accurate with predictions, as it seems most of you already know.

[eLROY]

Electoral-vote.com has Bush up 311 to 223. A lot of the polls are stale, but polls are trendy and Bush has been trending up today.

[Matty]

[ QUOTE ]
Electoral-vote.com has Bush up 311 to 223. A lot of the polls are stale, but polls are trendy and Bush has been trending up today.

[/ QUOTE ]Trending up today? The 3 most recent polls have the race tied. electoralvote.com doesn't reflect these yet. Electoral maps lag behind polls.

[eLROY]

Florida, September 14, Bush by 6. That's more recent than any poll you're looking at.

They also just added Nevada, which seems reasonable, and New Jersey, which is a dream.

[emp1346]

[ QUOTE ]

From what I understand, gov't officials considered using bookies and gamblers to predict when the next terrorist attack would occur, because historically, they have been the most accurate with predictions, as it seems most of you already know.

[/ QUOTE ]

woah... you can bet on terrorist attacks? i'd assume that means you can also bet on wars...

hmm... wouldn't that give good ol' G-dub an unfair advantage? he could lay down a fat bankroll and then send the boys off... sounds a little like being able to throw the game when you got money riding on the other team... /images/graemlins/grin.gif

//NOTE: please no one respond with the whole 'war is right'
//or 'war is wrong' or anything about that...

[Nepa]

[ QUOTE ]
Gamblers are never behind the curve. People betting their money is always a better indicator than polls or pundits.

I would trust the gamblers every time.

[/ QUOTE ]

You make it sould like Kerry at 1 1/2 2-1 has no chance. As a poker player I know that 2-1 shots come in all of the time. Smart money doesn't always win, if it did the bookies would be out of business.

[Clarkmeister]

"Smart money doesn't always win, if it did the bookies would be out of business. "

How is it that so many people don't understand something so simple.

[adios]

.....

[Matty]

[ QUOTE ]
Florida, September 14, Bush by 6. That's more recent than any poll you're looking at.

[/ QUOTE ]No, it isn't. Harris on the 16th say Kerry 48 Bush 47 (http://online.wsj.com/public/article/0,,SB109526872487418642,00.html?mod=todays%5Ffree% 5Ffeature). Also on the 16th Rasmussenreports has Kerry within 4 points. Democracy Corps on the 14th has Bush 49, Kerry 48.

IBD/CSM/TIPP on the 12th had Bush 47 Kerry 47

[Matty]

[ QUOTE ]
Gamblers are never behind the curve. People betting their money is always a better indicator than polls or pundits.

I would trust the gamblers every time.

[/ QUOTE ]Did you trust them when they were picking Kerry?

[Utah]

[ QUOTE ]
Did you trust them when they were picking Kerry?

[/ QUOTE ]

Yes. Absolutely.

I trust them with accurate probabilities on all events

[cardcounter0]

"he could lay down a fat bankroll and then send the boys off..."

Check the investments by the Carlye Group, Bectel Corp, etc.
and George's Uncle Bucky's defense contractor investments in WMD protection, and you will see who has profited from the Iraq Invasion.

[Matty]

[ QUOTE ]
[ QUOTE ]
Florida, September 14, Bush by 6. That's more recent than any poll you're looking at.

[/ QUOTE ]No, it isn't. Harris on the 16th say Kerry 48 Bush 47 (http://online.wsj.com/public/article/0,,SB109526872487418642,00.html?mod=todays%5Ffree% 5Ffeature). Also on the 16th Rasmussenreports has Kerry within 4 points. Democracy Corps on the 14th has Bush 49, Kerry 48.

IBD/CSM/TIPP on the 12th had Bush 47 Kerry 47

[/ QUOTE ]Also, a Pew poll came out today that had the race tied at 46.

[eLROY]

Are you dumb? Read your own link, that Harris poll ended on the 13th.

[eLROY]

[ QUOTE ]
No, it isn't. Harris on the 16th say Kerry 48 Bush 47 (http://online.wsj.com/public/article/0,,SB109526872487418642,00.html?mod=todays%5Ffree% 5Ffeature).

[/ QUOTE ]
Are you dumb? Read your own link, that Harris poll ended on the 13th. I'm not going to recheck the others, because I checked them earlier.

This morning, someone published a Dukakis poll taken in 1988. Do you think that one came out on September 16th too?

[Matty]

[ QUOTE ]
[ QUOTE ]
No, it isn't. Harris on the 16th say Kerry 48 Bush 47 (http://online.wsj.com/public/article/0,,SB109526872487418642,00.html?mod=todays%5Ffree% 5Ffeature).

[/ QUOTE ]
Are you dumb? Read your own link, that Harris poll ended on the 13th. I'm not going to recheck the others, because I checked them earlier.

This morning, someone published a Dukakis poll taken in 1988. Do you think that one came out on September 16th too?

[/ QUOTE ]Are you dumb? Read your post right above this one.

Also, the Survey USA poll you're citing ended on the 12th. So don't pull that [censored]. If we're going to go by the date the poll ends instead of the date it's been checked and released, then check your own source dipshit.

The Pew poll was completed on the 14th. It is more recent than the other poll I cited- which is still more recent than yours- and it shows a tie as well.

[eLROY]

[ QUOTE ]
Also, the Survey USA poll you're citing ended on the 12th. So don't pull that [censored]. If we're going to go by the date the poll ends instead of the date it's been checked and released, then check your own source dipshit.

[/ QUOTE ]
You're lucky I'm the only one reading your idiotic blather. What, do you think I made up the 14th? Are you blind, dumb, or drunk? You show me a screen capture and a link of where the poll I mentioned ended on the 12th, I'll send you 14 USPS money orders worth $9800, dumbass!

Are you ready to stop being wrong, for once in your life?

[Cyrus]

I am placing the emphasis on "hypothesis". Are the markets truly efficient then or not?

Watch your step.

[Matty]

[ QUOTE ]
[ QUOTE ]
Also, the Survey USA poll you're citing ended on the 12th. So don't pull that [censored]. If we're going to go by the date the poll ends instead of the date it's been checked and released, then check your own source dipshit.

[/ QUOTE ]
You're lucky I'm the only one reading your idiotic blather. What, do you think I made up the 14th? Are you blind, dumb, or drunk? You show me a screen capture and a link of where the poll I mentioned ended on the 12th, I'll send you 14 USPS money orders worth $9800, dumbass!

Are you ready to stop being wrong, for once in your life?

[/ QUOTE ]http://www.cpod.ubc.ca/polls/index.cfm?fuseaction=viewItem&itemID=4168

"Source: Survey USA / WFLA-TV
Methodology: Telephone interviews to 607 likely Florida voters, conducted from Sept. 12 to Sept. 12, 2004. Margin of error is 4.1 per cent."

You linked to electoral-vote.com, and that is the poll they used for their latest Florida update. Also, it is the only Florida poll released recently. Certainly the only one showing Bush up by 6 points.

I know how you got duped- you rolled your mouse over the elctoral-vote.com map, and saw the poll's release date.

Are you really going to send me money now?

[eLROY]

[ QUOTE ]
I know how you got duped- you rolled your mouse over the elctoral-vote.com map, and saw the poll's release date.

[/ QUOTE ]
Well, at least we cleared up whether you are a liar or just stupid. Lord only knows why you would post a URL from Canada - what, did your Google search include "12" and exclude "14?" But you're even too dumb even create a link in your post. Since you're 100% incapable of getting a clue, I recommend you stay home and play with blocks until this election is over.

[sfer]

The real question is: Do markets incorporate and process data faster and more accurately than individuals, on average. If the answer is generally yes, we have efficiency.

This will never be provable, but it's hard to show systematic evidence to the contrary.

[sfer]

I believe this was a proposal from DARPA that was scrapped fairly quickly for PR reasons.

[adios]

IMO sfer's answer was very good. What is your definition of a truly "effecient" market?

[Utah]

[ QUOTE ]
This will never be provable, but it's hard to show systematic evidence to the contrary.

[/ QUOTE ]

Experimental data shows the efficient market theory to be true. Its also shown to be true in the fact that there are not thousands of billionares who are able to capitalize on market inefficiences.

[Blarg]

[ QUOTE ]
Its also shown to be true in the fact that there are not thousands of billionares who are able to capitalize on market inefficiences.


[/ QUOTE ]

By definition. If you had to make thousands of billionaires out of the inefficiencies, there wouldn't be enough inefficiencies to go around. There's got to be some dead money in the pot somewhere.

Doesn't mean there is not a sizeable amount of inefficiency, though.