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| ▲ | some_random 2 days ago | parent | next [-] | | It doesn't matter if 99% resolve no, if they're priced appropriately betting no on every single one won't make you money. | | |
| ▲ | jfengel 2 days ago | parent | next [-] | | If they're appropriately priced, you can't win money at all, unless you have insider knowledge. | | |
| ▲ | okhobb 2 days ago | parent | next [-] | | The purpose of prediction markets is to communicate insider knowledge. | | |
| ▲ | miki123211 a day ago | parent | next [-] | | The purpose of any price-based system is to communicate knowledge, not necessarily insider knowledge. There are actually two theories on insider knowledge. One states that allowing insider trading is beneficial, as it allows prices to better match the underlying reality, the other states that this discourages non-insider trading, which actually makes the prices worse. Stock markets lean heavily towards the second theory, while prediction markets seem to be leaning towards the first. | | |
| ▲ | TeMPOraL a day ago | parent | next [-] | | Why would encouraging non-insider training be desirable in the first place, other than to create a more high-status form of gambling, with higher spouse acceptance factor than smoke-filled room poker games? People with no inside knowledge[0] are just trading on vibes, how is that useful for the economy? -- [0] - Or external knowledge, but actual knowledge - thinking of hedge funds stalking CEOs as they fly in private jets, or counting cars in parking lots from satellite photos, to get some probability estimates on factors actually relevant to the performance of a business and possible future events. | | |
| ▲ | jfengel a day ago | parent | next [-] | | The stock market wasn't designed to be gambling. You're buying a piece of a company. They want people to come so they can raise money for expanding businesses. If insider trading benefits some at the expense of others, people won't come. Obviously it has come a long way from that, and the markets have become more like gambling. You could probably allow insider trading at this point and the system would continue just fine. | |
| ▲ | efromvt a day ago | parent | prev | next [-] | | Hmm yeah it depends on your definition of insider. If you assume all raw information is public-ish, a market can reward those who can synthesize/operate on that knowledge to predict better. (The cars in the lot, etc. there is friction to this discovery; the knowledge can be communicated to others through the market after discovery to profit off the initial cost of discovery). There is symmetric competition to some degree. If you have true non public knowledge (I’m going to say something to tank the stock on this date) then you are purely extracting value from others because you will always win; they will never have that info and the incentive for anyone else to participate in price discovery would go away. | |
| ▲ | dasudasu a day ago | parent | prev | next [-] | | Non-insider trading is liquidity. That’s why people pay for retail trading volume (payment for order flow). Not because of nefarious reasons. Just because it represents liquidity. With no liquidity it’s impossible to enter or exit trades efficiently. | | |
| ▲ | jfengel a day ago | parent | next [-] | | Though at this point volume is far higher than needed for liquidity. We do not need companies holding stocks for a millisecond in order to squeeze out arbitrage, and we do not need day traders hoping to arbitrage noise. The stock market would not be noticeably less liquid if people had to hold stocks for 24 hours, but volume would drop like a rock. | |
| ▲ | a day ago | parent | prev [-] | | [deleted] |
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| ▲ | naniwaduni 18 hours ago | parent | prev | next [-] | | Stocks are a financing mechanism. They're useful for the economy independent of the price discovery aspect in the much the same ways that lending is, except that instead of receiving an obligation of future payment you're compensated on vibes. | |
| ▲ | a day ago | parent | prev | next [-] | | [deleted] | |
| ▲ | thetailrisk a day ago | parent | prev [-] | | [dead] |
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| ▲ | jfengel a day ago | parent | prev | next [-] | | Stock markets also want to keep executives honest. When the insider can affect the outcome, it creates bad motives. They don't want the CEO selling a bunch of puts, then deliberately tanking the stock. Not for the other bettors, but because the institution is about business. Prediction markets are doing a bit of that. Some won't take bets on an assassination. | | |
| ▲ | slashdev a day ago | parent [-] | | You can bet on assassination. There are polymarket prediction markets for leaders of many countries where you can bet on if they will cease to be the leader by X date, for any reason. If they get assassinated, those markets will resolve to yes. At least the rules don't specifically exclude that. |
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| ▲ | _cadp a day ago | parent | prev | next [-] | | >the other states that this discourages non-insider trading, which actually makes the prices worse This theory is fundamentally not credible, the other side of any trade you make on the stock market is essentially always going to be vastly more sophisticated than you. Insider trading makes zero difference to the end-user. The credible argument against insider trading is that it's a form of theft. You are making trades based on information which does not belong to you, and which you have an obvious duty to protect. You are essentially stealing from the people you work for. | | | |
| ▲ | mapt a day ago | parent | prev [-] | | In the hypothetical Anarcho-Capitalist finance world, the remedy for a breach of fiduciary duty (corporate graft / insider tips) looks more like Jim Bell than Chuck Rhoades. |
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| ▲ | khimaros 2 days ago | parent | prev | next [-] | | https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha... | | |
| ▲ | eru 2 days ago | parent [-] | | Compare and contrast https://www.astralcodexten.com/p/come-on-obviously-the-purpo... | | |
| ▲ | Orygin a day ago | parent | next [-] | | Why does the page have a non-removable blue filter? Feels like a popup shadow that doesn't go away... | |
| ▲ | viccis 2 days ago | parent | prev | next [-] | | >The purpose of the Ukrainian military is to get stuck in a years-long stalemate with Russia. >These are obviously false. The purpose of the Ukrainian military is to exhaust the Russian army's materiel and test out our weapons. "Years-long stalemate with Russia? Yes, please." -the US. Seems like an overwhelmingly common Scott Alexander L. | | |
| ▲ | verzali 2 days ago | parent | next [-] | | Scott Alexander often seems surprisingly unaware of his priors, especially when speaking about things beyond the American shores. | |
| ▲ | eru 2 days ago | parent | prev [-] | | > The purpose of the Ukrainian military is to exhaust the Russian army's materiel and test out our weapons. Since when does country A decide what the purpose of country B's military is? | | |
| ▲ | TeMPOraL a day ago | parent | next [-] | | In practice, always. It's similar to the claim that during the cold war, US basically controlled USSR economy, and vice versa, and that US won because USSR economy just couldn't keep up. On smaller scale, this is the (in)famous "fire and motion"[0], which works in business as much as it does in military tactics. Make a move, forcing competitors to respond to it. If you're better at it than them (and lucky), you can choose your moves to make their responses go to your advantage. -- [0] - https://www.joelonsoftware.com/2002/01/06/fire-and-motion/ | |
| ▲ | viccis 2 days ago | parent | prev [-] | | Since country A pays for country B's military. | | |
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| ▲ | vasco 2 days ago | parent | prev | next [-] | | Is the purpose of replying to Wikipedia with random substack drivel to get downvoted? Or is it a byproduct of the system? | | |
| ▲ | eru 2 days ago | parent [-] | | Well, that's not what the system does. So it can't be its purpose, I guess. In any case, the blog is well regarded in these circles. |
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| ▲ | actionfromafar a day ago | parent | prev [-] | | I was shocked at how shallow that take is. I expected more. |
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| ▲ | savanaly a day ago | parent | prev | next [-] | | Not just insider knowledge. Being more willing to put in hard work than anyone else, being better at synthesizing public knowledge, or maintaining a more clear and unemotional outlook all can also lead you to superior outcomes. | |
| ▲ | mastax a day ago | parent | prev | next [-] | | That isn’t how they were pitched to the FTC but it does appear to be their ultimate use case. | |
| ▲ | UncleMeat a day ago | parent | prev | next [-] | | People say this but I don't believe that it is true. The original theoretical purpose was to incentivize the creation of new knowledge, not reward insider knowledge that already exists. For example, to fund research that helps answer some unanswered question. Today, the purpose is obviously gambling. We can see that clearly from the marketing. | |
| ▲ | altmanaltman 2 days ago | parent | prev [-] | | and facilitate insider trading, like how do people miss that part | | |
| ▲ | wahern 2 days ago | parent [-] | | To say the purpose of a market is to reveal insider information is how you say insider trading is a good thing without saying insider trading is a good thing. There's a ton of scholarly debate about it, and at least most of the early stuff was pretty earnest. But rather than the debate becoming more refined and nuanced over time it seems to have bifurcated along partisan (or partisan adjacent) lines like everything else, similar to the Keynesian/Misesian divide. | | |
| ▲ | js8 2 days ago | parent [-] | | The proof that free markets are efficient (even in the narrow sense economists use this word) relies on an assumption of perfect information. This has been known at least since Akerlof. The Misesian folks are a lost cause, IMHO. They're hardcore rationalists, self-indulging in circular moral arguments from assumptions that don't apply in the real world. | | |
| ▲ | wahern a day ago | parent [-] | | That's what makes the insider trading argument so tantalizing--it's arguing that it helps move the market closer to perfect information. But, of course, the world is complicated and dynamic, and it tacitly depends on all kinds of assumptions and beliefs about the resulting costs and benefits. It would be nice if the debate shifted to pinning down those assumptions, quantifying them as best as possible, and then iteratively tweaking and adjusting regulatory models. But that's true of just about everything and probably too unrealistic an ask, especially at a time when one side is convinced markets are just a mechanism for unjust exploitation, and the other side is convinced regulation is what sustains inequity (to the extent inequity is something even worth caring about). |
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| ▲ | names_are_hard a day ago | parent | prev | next [-] | | Yes. And indeed, when aggregated and averaged across all betters, nobody makes any money. The question isn't what percentage of bets resolve to no, but whether there is a consistent bias in the prices away from the fair price, which has an expected value of 0, and what direction that bias is in. | |
| ▲ | hamasho 2 days ago | parent | prev [-] | | I hate that many people or even the news and scientists have already started to see the odds of prediction market as fact. I'm sure in the near future, policy decisions or war strategies will be decided by prediction markets' odds, if they are not already being used. | | |
| ▲ | jonahx 2 days ago | parent | next [-] | | They're far from facts, but have an important advantage over most other sources: the bettors are motivated to predict truth. News sources are motivated to get clicks, to appeal to certain audiences, and to retain tribal customers. None of these create incentives for truth. You can seek out smart, well-informed and principled journalists who will prioritize truth-seeking over money-making. There are some. But the fact remains you are relying on character to override incentives. With prediction markets, incentives and truth are naturally aligned. This makes them a powerful and valuable resource imo, even if there is a lot of scumminess that comes along for the ride. The insiders, more than anyone, are contributing to the truth signal. | | |
| ▲ | busssard a day ago | parent | next [-] | | on the other hand, similar to that one old assassination page, where you bet on the death date of people, it might encourage someone to make an event happen and thus fabricate the insider knowledge if the price is high enough. So the feedback from prediction market turns around, so you can essentially buy events if you put enough money in. | |
| ▲ | mvc a day ago | parent | prev | next [-] | | > the bettors are motivated to predict truth. But also motivated to bend the truth to their bet as the journalist in Israel found. | |
| ▲ | Geezus_42 2 days ago | parent | prev [-] | | They are motivated to pick what they believe is most likely to happen. The develope their idea of what is most likely to happen for the news. The reporters use their bets to wrote stories predicting what will happen. See the loop? | | |
| ▲ | laughing_man a day ago | parent | next [-] | | Reporters have an entirely different incentive -- they're less interested in what will happen than whether or not they get eyeballs on their story. | |
| ▲ | jonahx 2 days ago | parent | prev | next [-] | | That's not how it works. First, you have inside traders. Then, among legitimate bettors, you have smart people using multiple data sources (not just the "news") and doing sophisticated analysis that most journalists cannot do, and are not motivated to do -- again, because their incentives are different. | | |
| ▲ | vasco 2 days ago | parent [-] | | Smart people cannot predict things by 'research'. "Will the US strike Iran by X date" going from 20% likelihood to 80%+ within hours points simply to insiders. You can do research to know the US would strike, there's no other point in moving multiple carriers over to somewhere. But exactly WHEN is not researchable. This applies to most other bets. So lets stop pretending there's anything more than 2 cohorts, insiders and degenerate gamblers. | | |
| ▲ | TheCowboy a day ago | parent | next [-] | | It's an empirical fact that smart people can predict things by doing research. See Tetlock's book Superforecasting. I've been doing it profitably myself for almost 10 years now. I have zero special inside knowledge, and no access to any other non-public information. > Will the US strike Iran by X date Last year I did think the market for a strike on Iran was significantly underpriced given the information and conditions within a specific frame of time. I don't think every smart person can just pop into prediction markets and print money, but I know many smart people who are long-term winners. I also don't try to knock people as degenerate when they have genuine talent. | | |
| ▲ | vasco 13 hours ago | parent [-] | | You haven't been profitable for 10 years on prediction markets and you being profitable doesn't mean anything in regards to insiders or the rigging of a market. |
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| ▲ | thetailrisk a day ago | parent | prev [-] | | [dead] |
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| ▲ | eru 2 days ago | parent | prev [-] | | No? Where's the loop? |
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| ▲ | a11ce 2 days ago | parent | prev [-] | | See also: https://mason.gmu.edu/~rhanson/futarchy.html |
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| ▲ | treyd 2 days ago | parent | prev [-] | | That's a massive "if". | | |
| ▲ | some_random 2 days ago | parent | next [-] | | Totally, that's the entire conjecture of this bot. My point is just that the odds of the underlying events are irrelevant, what matters is if they're matched with the betting price | | |
| ▲ | irishcoffee 2 days ago | parent [-] | | It is not the entire conjecture of this bot. The dev claimed a percentage of bets that win with “no” and wrote some code to fuck around. You though, are claiming that the market is perfectly priced, or should be, such that this strategy won’t work. It’s pretty hard to balance the odds of an animal seeing their shadow vs the expected strike price of the nasdaq. It’s clear you’re not familiar with betting markets, which is in your best interest most likely, but that’s not how this works. You’re arguing against yourself… against a point nobody made but you. | | |
| ▲ | some_random 2 days ago | parent [-] | | You are either reading way too much into what I am saying or statistically illiterate. |
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| ▲ | CyberDildonics 2 days ago | parent | prev [-] | | Of course, they were just explaining the basics of statistics. |
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| ▲ | pinkmuffinere 2 days ago | parent | prev | next [-] | | > 73% of all polymarkets do resolve to No though. I bet the average price for a no bet across these markets is 73 cents. | | |
| ▲ | llamataboot 2 days ago | parent | next [-] | | A persistent bias in prediction markets is pricing very non likely events as slightly more likely than they are. ie; a 1% event priced at 4%, etc, because people like to bet long shots. Whether there is enough of a predictable bias there to snag enough low return high probability bets to beat the vig and not shift the markets I have not looked into in any way,but it is a known bias with them. The real money to be made in prediction markets is being the ones with the actual knowledge which is arguably why they are useful and why for some topics, people find them abhorrent. | | |
| ▲ | jjfoooo4 a day ago | parent | next [-] | | It might be a bias in terms of the probability of events, but I'm not so sure this is a market inefficiency in terms of actual trading strategy. If true odds are 1% and the event is priced at 4%, I can sell NO for a 3% edge... but lose 100% once out of a hundred. Doesn't seem worth it! | |
| ▲ | nearbuy 2 days ago | parent | prev [-] | | I think you get less return on investment for the same absolute edge in percentage points. A 1% event priced at 4% gets you a 3/96 = ~3.1% return. A 53% event priced at 50% gets you a 6% return. You nearly double your returns by investing in the latter market even though they're both off by 3 percentage points. If the market isn't resolving soon, the small return might not be worth it. |
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| ▲ | bargainbin 2 days ago | parent | prev | next [-] | | 71 cents*, the bookie gets a cut either way it goes. | | |
| ▲ | Cthulhu_ 2 days ago | parent | next [-] | | This is the truth of the matter, ultimately nobody wins except the bookie, who profits either way. | | |
| ▲ | eru 2 days ago | parent | next [-] | | Hedging can itself be a useful service, even if the customer doesn't make money on average. Have you heard of insurance? | |
| ▲ | benmanns 2 days ago | parent | prev [-] | | On Polymarket you can be the bookie and put up a yes at $0.72 and no at $0.74 if you’re confident in that 73% estimate. | | |
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| ▲ | zahlman 2 days ago | parent | prev | next [-] | | Even if a cut isn't taken and there aren't other inefficiencies, any money tied up in long-term predictions is earning 0% instead of whatever the current risk-free rate of return is. | | |
| ▲ | xrisk 2 days ago | parent | next [-] | | Assuming that the prediction market is perfectly priced right? How accurate is that assumption, or are you counting that as an “inefficiency”? | |
| ▲ | eru 2 days ago | parent | prev | next [-] | | Earning less than the risk free rate is a 'cut being taken'. | |
| ▲ | bradleyjg 2 days ago | parent | prev [-] | | IBKR relentlessly advertises on the radio, so I’m aware that on their scheme you earn an interest like incentive coupon for every day you hold open the position. | | |
| ▲ | anonym29 2 days ago | parent [-] | | Happy IBKR customer here. ForecastTrader has absolutely horrific liquidity outside of maybe 30-40 large contracts. The rest is all market makers that only offer 10-100 or so shares at each price point before bumping up a penny or two. No knock on IBKR as a whole, but you can't even effectively buy on most events or outcomes without slippage eating away your entire edge, and forget about real serious positions above a few grand entirely outside of those 30-40 big contracts. |
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| ▲ | mr_00ff00 2 days ago | parent | prev | next [-] | | Untrue for polymarket. True for kalshi. No bookie fees on polymarket | | |
| ▲ | pinkmuffinere 2 days ago | parent [-] | | Wow that's news to me. How does polymarket make money if not from fees? | | |
| ▲ | SirSourdough 2 days ago | parent | next [-] | | It doesn't seem like it's strictly true that they don't charge trading fees. From their docs, it looks like they charge fees to bet "takers" (as opposed to makers), but exclude the geopolitical and world-events markets where they don't charge fees. I have to imagine that may be related to some of the blow-back towards prediction markets about profiting on topics like war & their potential for manipulation. Given it sounds like the bot bets everywhere other than sports, many of those categories would likely have fees in this case. | |
| ▲ | CrazyStat 2 days ago | parent | prev | next [-] | | Polymarket charges “taker” fees (people removing liquidity by matching listed orders) on most markets. Geopolitics markets are exempt. A portion of the collected fees then get redistributed to “makers” (people who provide liquidity by listing orders for others to match). Presumably the rest of these fees make up polymarket’s revenue. | | |
| ▲ | OJFord a day ago | parent [-] | | Which is essentially also providing a platform for making the book for the other platform, on which 'bookie fees' are charged, but Polymarket itself only keeps a certain cut of it, for facilitating but not actually book-making. |
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| ▲ | nl 2 days ago | parent | prev | next [-] | | They emit new (crypto) tokens which they can sell | |
| ▲ | richarlidad 2 days ago | parent | prev [-] | | trying to become bloomberg by selling to institutions |
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| ▲ | dlgeek 2 days ago | parent | prev [-] | | Wouldn't it be 75 cents then? (The cut would come out of higher pricing, since the payout is always a dollar). | | |
| ▲ | eru 2 days ago | parent [-] | | Well, 75 cents for you buying the bet, 71 cent for you selling the bet. Or something like that. |
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| ▲ | traderj0e 2 days ago | parent | prev | next [-] | | It's not. But also a lot of those stats thrown around are misleading. | | |
| ▲ | pinkmuffinere 2 days ago | parent | next [-] | | If the average no costs less than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that the nothing-ever-happens strategy here is profitable. Are you claiming that it is profitable? Or are one of those premises incorrect? Edit: conversely, if the average no costs _more_ than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that an everything-always-happens strategy is profitable (neglecting slippage) | | |
| ▲ | Majromax 2 days ago | parent | next [-] | | > Edit: conversely, if the average no costs _more_ than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that an everything-always-happens strategy is profitable (neglecting slippage) Or just the bid-ask spread; price no at 73.25 and yes at 27.5 and you have a profitable but theoretical mid-market price. | |
| ▲ | traderj0e 2 days ago | parent | prev [-] | | From what I've seen and tested, it's been profitable, for the reason you said. Variance and other caveats caused me to not pursue it further. https://news.ycombinator.com/item?id=47754918 |
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| ▲ | cheschire 2 days ago | parent | prev [-] | | Are you willing to pay $.27 for that perspective? Sounds like we have a market! |
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| ▲ | mrandish 2 days ago | parent | prev | next [-] | | > I bet the average price for a no bet across these markets is 73 cents. Behavioral economics has already answered the question of whether humans are, on average, perfectly rational economic actors. They are not. To the contrary, there is substantial evidence indicating a meaningful number of humans will mis-estimate the likelihood of uncommon future events. | | |
| ▲ | cortesoft 2 days ago | parent | next [-] | | It doesn't matter if a vast majority of people are not rational economic actors. It only takes 1 rational actor with enough capital to take the other side of all the bad bets, and the market will be priced correctly even if the other 99 people are irrational. | | |
| ▲ | Majromax 2 days ago | parent [-] | | 'Enough' [capital] is doing a lot of work in that sentence. In the limit of a one-sided irrational market, the 'rational actor' would need to take the other side of every open transaction. | | |
| ▲ | cortesoft 2 days ago | parent [-] | | Yeah, but in the limit of a one-sided irrational market, the rational actor is going to be given as much capital as he can take. | | |
| ▲ | eru 2 days ago | parent [-] | | In the long run. In the short run, our rational actor will be constrained by the Kelly criterion, well and whatever outside funding she can raise. |
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| ▲ | skywalqer 2 days ago | parent | prev | next [-] | | Well, if the price would be incorrectly set, then bots like this one would make money, which would in sufficient time cause the market to adapt and the average price would change so the bot doesn't work. | |
| ▲ | wat10000 2 days ago | parent | prev [-] | | That doesn't matter so much when it happens in a place where people can make money from other people's irrationality. Even if there are a bunch of irrational people placing bad bets on uncommon future events, rational people looking to make a buck will take the other side of that bet, until the price is sensible. The alternative would be that there's a bunch of free money sitting there waiting for someone to decide to pick it up, and nobody is, not even you. | | |
| ▲ | eru 2 days ago | parent [-] | | Actually, having a bunch of noise traders around is a great attraction for the ration people to show up. |
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| ▲ | r0fl 2 days ago | parent | prev | next [-] | | I’ll take the “no” side of that bet ;) | |
| ▲ | kristopolous 2 days ago | parent | prev [-] | | Why would outcomes match perceptions? The whole premise of gambling is that they don't | | |
| ▲ | gowld 2 days ago | parent | next [-] | | The whole premise of prediction markets is that the few people whose perception do match outcomes make bets to push the money-weighted average perception toward outcomes. If perceptions still don't match outcomes at that point, average return is 0 minus transactions, with high variance. | | |
| ▲ | kristopolous 2 days ago | parent [-] | | huh? that sounds like ideology and not empirical observation. | | |
| ▲ | bofadeez 2 days ago | parent | next [-] | | That's just how limit order books work with mark-to-market pricing | | |
| ▲ | xrisk 2 days ago | parent [-] | | Could you point me towards some resource that would help me understand what you wrote? Genuinely curious about how this stuff works | | |
| ▲ | eru 2 days ago | parent [-] | | https://en.wikipedia.org/wiki/Efficient-market_hypothesis might be a good start. | | |
| ▲ | kristopolous 2 days ago | parent | next [-] | | That's pure ideology and not empirical. There's you know, even a large section there in that article pointing that out | | |
| ▲ | eru 15 hours ago | parent [-] | | The index fund industry would like to have a word with you. |
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| ▲ | bofadeez 2 days ago | parent | prev [-] | | Step 2: https://en.wikipedia.org/wiki/Grossman%E2%80%93Stiglitz_para... | | |
| ▲ | eru 2 days ago | parent [-] | | Yes, but I always found that objection a bit silly. It's like pointing out that real cows are obviously not perfect spheres nor do they live in a vacuum. > [...] if prices perfectly reflected available information, there is no profit to gathering information, in which case there would be little reason to trade and markets would eventually collapse.[2] That's a stupid way to formulate this. Markets wouldn't "collapse". They would get slightly less efficient until equilibrium is restored to where arbitragers can make enough money to keep prices at that level of efficiency. | | |
| ▲ | bofadeez 2 days ago | parent [-] | | Maybe not "collapse" in a the sense of going to zero but if there was no profit to trading, then the quant trading industry would not exist, trading profits would collapse. Meanwhile Two Sigma is hiring alpha quants to be AI research scientists at $250k starting salary + bonuses. Even if we're just talking about the HFT/sell-side, there clearly exist various anomalous inefficiencies that can be exploited. Fama's guy doesn't agree either [1] https://www.ft.com/content/813b3d76-6ef1-427d-a2e0-76540f58a... | | |
| ▲ | eru 2 days ago | parent [-] | | As I said, if we woke up this morning and prices were magically efficient in an idealised sense, at most a few quants would go home and retire early, and tomorrow we'd be back at the level (in-) efficiency that allows people to be market makers. | | |
| ▲ | bofadeez 11 hours ago | parent [-] | | How can prices reflect all available information if there's no profit to collecting the information and there are no informed quant traders? Who is collecting the information exactly so that prices can reflect it and what is their incentive for doing so? Efficiency doesn't happen magically or automatically - traders create it. It's like a kaggle contest* to process information, with the incentive being profit. You don't believe in the existence of residual return orthogonal to priced cross sectional risk factors (alpha)? E.g. Trends, momentum, volatility clustering, etc. many easily demonstrable inefficiencies. VPIN and order flow toxicity are highly predictive features. Most HFT MM especially in crypto involves hybrid alpha in addition to the (visible) bid-ask spread, which it itself an "inefficiency" to compensate market makers like Jane Street and other successful firms that operate on the assumption that weak form EMH is not accurate. * https://www.kaggle.com/competitions/jane-street-real-time-ma... | | |
| ▲ | eru 4 hours ago | parent [-] | | I don't know what your question is about? I would have hoped that by now it was obvious that we are talking about a _specific_ weak form of the EMH that takes friction into account? What is your whole first paragraph about? Who are you trying to convince? Where's the strawman that claimed that the strongest version of EMH that you can imagine is literally true? There's no single weak form of EMH that could be accurate or inaccurate: there are many versions of the EMH in various strengths and dimensions (that can be accurate or inaccurate). To be more specific: Jane Street believes (or acts lie they believe) that markets are at least efficient enough that it takes a lot of effort for them to make money. As a very, very weak form: someone doing chart astrology, eh, I mean technical analysis, on S&P 500 stocks won't beat the market. But even much stronger versions than this are defensible. The real strong forms that say that all information is preciously reflected in profits is a simplifying assumption you can sometimes make to make your life easier. Just like you sometimes neglect friction in physics. But when you want to decide how long your train needs to emergency brake, you kinda need to take friction into account. Similarly, when trying to make money in the market or trying to understand how others like Jane Street make money, the strongest EMH is not a good guide. | | |
| ▲ | bofadeez an hour ago | parent [-] | | Question is about EMH and how you expect efficiency to be achieved absent profit for collecting the information. There are 3 accepted forms of EMH. I'm talking about weak form - just price history and nothing else. E.g. formulaic alpha have demonstrable predictive value in modeling. All that to say you believe trading profits are real. Maybe you just need to learn more about what a buy side alpha quant at two sigma does for a living. Trading models can be robust and exploit real inefficiencies. Weak form EMH is demonstrably false on it's face, as you agree. |
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| ▲ | thetailrisk a day ago | parent | prev [-] | | [dead] |
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| ▲ | paulddraper 2 days ago | parent | prev [-] | | But in aggregate they might. |
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| ▲ | tekno45 2 days ago | parent | prev | next [-] | | its funny, tells you it barely works, and its a good meme. Successful project imo. | | |
| ▲ | craftkiller 2 days ago | parent [-] | | In addition, it serves as a good template for writing your own polymarket bot with whatever logic you want. |
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| ▲ | ryandrake 2 days ago | parent | prev | next [-] | | For the uninitiated, I believe the meme comes from Reddit, where there is one criticism subreddit, r/ThatHappened where people accuse other Redditors of making up stories of events that never actually happened, and then a meta-criticism subreddit, r/Nothingeverhapens, where people make fun of r/ThatHappened as conspiracy theorists who think everything posted online is fake. Hard to tell how much of each subreddit is trolling and how much are people earnestly criticizing each other. | | | |
| ▲ | theginger 2 days ago | parent | prev | next [-] | | Does the existence of that knowledge make a slight bias lowering the odd on no?
I could fork this and with a 1 line change earn dozens of dollars as long as I don't tell anyone what that secret change is. | | |
| ▲ | zahlman 2 days ago | parent [-] | | No, I think the bias is really just a reflection of how propositions are phrased. We could imagine a mirror-world prediction market that offers all the same propositions, but phrased oppositely: e.g. a market in "person X will die by Y date" becomes a market in "person X will survive until Y date". And in that market, we would see a bias towards propositions resolving as Yes. |
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| ▲ | raincole 2 days ago | parent | prev | next [-] | | > 73% of all polymarkets do resolve to No though. I wonder what it means exactly. Typical Polymarket looks like this: X happens before May. [Yes][No] X happens before June. [Yes][No] X happens before July. [Yes][No] ... So even if X ended up happens in December, it's still 12.5% Yes and 87.5% No? | | |
| ▲ | traderj0e 2 days ago | parent | next [-] | | That's one event containing three markets, each yes/no. And in a way each market is two separate markets, buy/sell yes and buy/sell no, but they mirror each other. | | |
| ▲ | raincole 2 days ago | parent [-] | | I understand that. That's not my question tho. I am asking for the exact meaning of the 73% number. |
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| ▲ | 2 days ago | parent | prev | next [-] | | [deleted] | |
| ▲ | lazyasciiart 2 days ago | parent | prev [-] | | And how do you report it in May? |
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| ▲ | nicman23 2 days ago | parent | prev [-] | | reminds me of that one story when someone won a poker bot competition by always going all in |
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