Polling appeared to be decent, but with a skewed under reporting of trump support for an unknown reason. Lots of speculation about why, but it’s still just speculation.
Betting markets seemed all over the place, poor predictions that swung around, and at times were clearly wrong.
538’s model of potential outcomes was right on target and their analysis was solid. Biden’s chance of winning was high because he could survive a polling error, and he did.
What happened the night of the election definitely seems to suggest emotional betting.
It seemed like everyone was anxious, despite there being plenty of information ahead of time about how to expect ballot swings to occur.
This makes prediction markets seem more like casino "oh no, snake eyes again" gambling than beat-the-house counting-cards type stuff.
There has to really be somebody else on the other side of every single Predict It trade, this contrasts to two other situations we might think about:
1. A bucket shop. You aren't betting against PredictIt. So even if the price displayed is 40¢ and you have 1000 units, you can't necessarily turn them into $400, because you need somebody else to actually pay 40¢ for each of those 1000 units or they'll just sit there.
[ Eventually PI resolves each prediction by a means described in the prediction, e.g. "Will Joe Biden drop out of Presidential Race by end of October 2020?" resolved to "NO" at the end of October when, unsurprisingly, Joe had not dropped out, and everybody holding a unit of NO gets $1 minus fees added to their cash holding and all units both YES and NO vanish. ]
2. Market Makers. A listed stock has "market makers" who promise to deal in the stock on the market. You don't need to worry about finding someone to sell your 1000 units to, because the Market Maker will definitely always buy. But on PredictIt there is no Market Maker, so even if the last trade was at 40¢ and you're happy to take 39¢ your 1000 units might sit there until they resolve (and if you're happy to take 39¢ for them you likely do not expect them to resolve in your favour) if there are no buyers at 39¢.
It certainly is harder to rationalise caring very much about PredictIt when you notice that "Trump NO" (Donald Trump is not elected to be the next President of the United States of America) costs about 85¢ right now, even though he's lost and the resolution will pay $1 for that 85¢ "gamble".
But again, liquidity. That market is not very liquid, so you likely shouldn't think too much of it.
The Kiwis who run this as a research project hopefully learn something valuable from it. I wouldn't be surprised if their take is that it works better for less newsworthy stuff than a US Presidential Election.
I just tried to buy a bunch of these. When I clicked [Submit Offer], I got this message:
We have reached the maximum number
of traders on this contract.
> But again, liquidity. That market is not very liquid, so you likely shouldn't think too much of it.
Exactly. So this "86¢" appears to be totally meaningless now. If I can't buy at that price, then anyone holding it can't sell. There's no action here.
We have reached the maximum number of traders on this contract.
Well so much for price discovery, huh?
These are basically deep OTM options. In Feb this year, you could call a deep SPY OTM put as delusional; because the speed of the market crash has never happened previously in history and is a 6 to 7 sigma event. These options would have paid out 10,000%; at the best possible times.
There are various possible events in the world which could've caused a popular win victory for Trump. Such as:
* Biden getting COVID and not surviving * Armed warfare or terrorist attack against the United States * other unlikely, but possible events.
There is a premium to insurance paying out when SHTF. There's also high withdrawal fees on PredictIt and betting size limits.
Look at Betfair if you want a better example. Quite rational markets.
Even if something awful happens and Biden isn't able to take office, he'll still win the popular vote. I think betting size limits are the main issue, combined with people betting against Trump diffusing their bets in correlated markets.
I think the first half of this is the money quote. The markets are definitely more Republican (or maybe just Trump?) leaning. I'm not convinced that the second half being true isn't just a coincidence.
IMO the analysis about how PredictIt bettors followed 2016 polling trends seems to be ascribing them an excess of rationality. I think if you mirror that S-curve diagonally you can see that: The betting markets put really high odds for Trump in states like New Hampshire and Minnesota(which went 55% to Biden but still had 25% odds of going blue). If you look at the mirroring red states which went 55% to Trump, there were no bettors expecting a blue wave (Missouri and South Carolina had ~5% odds of going blue).
When you look at markets like "Who Will Win California" or "Who Will Win the Popular Vote", I'm convinced that many people making bets are delusional.