Thursday, September 18, 2008

Forget the polls!

When it comes to the latest polls on who will win the US Presidential Election later this year, I look no further than Intrade. Why? Because its not simply a case of people picking one or another - but its where people are putting their money where their mouth is.

Intrade works like the stock market where people can "Buy" or "Sell" a stake in the prediction that the candidate (or whatever their proposition is) will come true. If it comes true, then it pays off at $10 per "share". Another way of looking at it is a marketplace for bookies and gamblers. The bookies make the "Sell" market and the gamblers make the "Buy" market.

For quite some time Obama was leading McCain until Sarah Palin came along when McCain overtook Obama. The Palin effect seems to be wearing off at the same time the economy is going down the drain - putting a strain on the McCain efforts. Now the buy price for Obama is 50.4 and the price for McCain is 49.3. One can even see day to day charts of the price, which is an indication of the probability of who will win according to those who are willing to gamble over it.

As a side note - you will always make money if the totals were greater than 100 (commision to Intrade withstanding) thus ensuring the market remains efficient and liquid. The volume can top 30k in a day which is equivalent to $0.3 million on the table.

This is an interesting test to see if the money market is somehow hooked in to the publics feel and perception as to who is likely to win the election. Polls have samples of a few thousand. Intrade has a sample of tens to hundreds of thousands who are willing to put their money where their mouth is!

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