Written by :
Published on :
The online betting exchange intrade.com has a Republican takeover of the House of Representatives at 94 percent, and that number could increase further before results start trickling in.
Just how accurate are prediction markets, one might ask?
Gambling911.com honed in on the importance of prediction markets and betting exchanges in determining outcomes of political races leading up to the 2008 US Presidential campaign.
A prediction market is a bit like the stock market, except that you are buying shares whose value depends on the success of a political candidate, rather than the profits earned by a corporation. And just as stock prices are a useful barometer of the health of a company, so too the price of a prediction contract is a barometer of the health of a political campaign.
It is the accuracy of market-generated forecasts that led the Department of Defense to propose running prediction markets on geopolitical events. While political rhetoric about "terrorism futures" led the plug to be pulled on that particular experiment, the original insight -- that markets can help make sense of vast amounts of disparate information-- remains valid.
Experimental prediction markets were established at the University of Iowa in 1988, and they have since amassed a very impressive record, repeatedly outperforming the polls. Research by economic historians has documented betting on elections over a century ago, and the impressive forecasting record of prediction markets was also evident in the period before scientific polling was adopted.
Elsewhere, while the polls indicate a tight race for Senate in the state of Nevada, the prediction markets suggest otherwise. Intrade has Tea Party favorite Sharron Angle with a 70 percent chance of winning on Tuesday over Senate Majority Leader Harry Reid.
Fellow Tea Party candidate Christine O’Donnell probably won’t fare as well in Delaware. She now stands under a 5 percent chance of winning based on betting data at intrade.
In Kentucky, Rand Paul is given a 97.5 percent chance of winning that state’s Senate race. He is the son of online gambling proponent Ron Paul.
- Jagajeet Chiba, Gambling911.com
