7 ms·

"Prediction" markets were supposed to be great because of insiders: they make the probabilities much more accurate and actually useful for forecasting. But the

"Prediction" markets were supposed to be great because of insiders: they make the probabilities much more accurate and actually useful for forecasting. But they ended up just being for gamblers and there is no more signal.

tototrains 7mo ago
I regularly check geopolitical markets to see if a breaking news story is substantial or not, and find it useful. It can help distinguish between propaganda and intelligence there. It does seem like there could be a distinction between markets which require genuinely knowledge and analysis (geopolitics), versus pure gambling (sports, crypto up/down 5 minutes, etc), but I'm not sure who's going to bother making it.
- William_BB 7mo ago
  (Geopolitical) prediction markets almost always tend to overreact. This is expected from retail, so I'm not sure about the signal.
  - echoangle 7mo ago
    So why not just always bet against their reaction? Over time you should make money then, right?
YokoZar 7mo ago
You may be interested in "Do Morons Make Prediction Markets More Accurate?" - https://nicholasdecker.substack.com/p/do-morons-make-prediction-markets https://nicholasdecker.substack.com/p/do-morons-make-predict... Essentially the argument is that more dumb money in a prediction market provides an even stronger incentive for smart money to join, moving the price back to an accurate probability.
- duxup 7mo ago
  Isn't the smart money incentive there because the market is wrong? That also seems to assume that there’s enough smart money (and smart information) to balance things out. I’m not sure about that.
  - skybrian 7mo ago
    In a larger market, traders can make money off smaller price discrepancies.
Balgair 7mo ago
Prediction markets are a great idea, but in practice their users (and eventually their owners) only want sports gambling. The addiction overrides everything. We're sooo screwing over an entire generation of men.

tototrains 7mo ago

I regularly check geopolitical markets to see if a breaking news story is substantial or not, and find it useful. It can help distinguish between propaganda and intelligence there. It does seem like there could be a distinction between markets which require genuinely knowledge and analysis (geopolitics), versus pure gambling (sports, crypto up/down 5 minutes, etc), but I'm not sure who's going to bother making it.

William_BB 7mo ago
(Geopolitical) prediction markets almost always tend to overreact. This is expected from retail, so I'm not sure about the signal.
- echoangle 7mo ago
  So why not just always bet against their reaction? Over time you should make money then, right?

YokoZar 7mo ago

You may be interested in "Do Morons Make Prediction Markets More Accurate?" - https://nicholasdecker.substack.com/p/do-morons-make-prediction-markets https://nicholasdecker.substack.com/p/do-morons-make-predict... Essentially the argument is that more dumb money in a prediction market provides an even stronger incentive for smart money to join, moving the price back to an accurate probability.

duxup 7mo ago
Isn't the smart money incentive there because the market is wrong? That also seems to assume that there’s enough smart money (and smart information) to balance things out. I’m not sure about that.
- skybrian 7mo ago
  In a larger market, traders can make money off smaller price discrepancies.

Balgair 7mo ago

Prediction markets are a great idea, but in practice their users (and eventually their owners) only want sports gambling. The addiction overrides everything. We're sooo screwing over an entire generation of men.