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Don't Trust Prediction Markets in the Final Hours
by Felix Salmon
Mar 05, 2008
Mar 05, 2008
After the polls closed in Texas last night, the DEM.TX.OBAMA contract on InTrade - the one judging his chances of winning the Texas primary - spiked up to 85, before embarking on a long and steady decline to zero. Clearly InTrade got Texas wrong: Obama had been the market favorite for weeks. But equally clearly last-minute trading frenzies are simply not to be trusted. Justin Wolfers might still believe that later prices are always better than earlier prices; I think it's becoming increasingly clear that an exception must be made for the final 24 hours or so of any political contract.
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