Cashing in on Online Prediction Markets 77
garzpacho writes "BusinessWeek takes a look at the use of prediction markets to forecast business success. These markets have been taking the form of games online--the Hollywood Stock Exchange, for example, allows players to bet on the success of movies. Hollywood is currently one of the largest consumers of prediction market data, in part because movies' broad appeal leads to a large number of players, but also because the markets have been surprisingly accurate--92% in picking Oscar winners over the last three years. Because of this success, other industries are taking a look; pharmaceutical and tech storage businesses are currently working to set up their own markets."
92% Oscar winner accuracy? (Score:3, Funny)
Only 92%? I'm sticking with The DaColbert Code [youtube.com].
Re:92% Oscar winner accuracy? (Score:2)
Surprising? (Score:2)
Is 92% "surprisingly accurate"? Only if Oscar winners are somewhat hard to pick, which they aren't. I'd bet I can pick more than half of the big categories correctly, despite never actually watching the movies; the surrounding hype is enough. Any competent film critic should achieve 90%.
Re:Surprising? (Score:3, Interesting)
Re:Surprising? (Score:2, Informative)
Not necessarily. Allowing Joe Q. Public to partake in the market would be a bad idea. Allowing the designers, testers, etc. to (anonymously?) participate is a great idea. Check out The Wisdom of Crowds [amazon.com] for a great read.
I remember that the DoD tried something like this with terrorism but cancelled it because of public outrage.
Cancelled before it was ever used. It probably would have worked, too.
Re:Surprising? (Score:3, Interesting)
Re:Surprising? (Score:2)
Re:I predict (Score:2)
Re:I predict (Score:1)
Re:I predict (Score:1)
Re:I predict (Score:2)
And I predict, that commas, will be ever increasingly, used in improper, places, making reading, sentences, seem like they, are done by, Shatner, or that handicapped, kid, from, "Malcom in the Middle."
Anyway, RTFA. It's not about using the market predictions to determine whether effects or story will dominate in a film production.
Well, duh (re: Hollywood) (Score:4, Interesting)
Jennifer Connolly in "A Beautiful Mind" (Score:1, Funny)
Plus everyone knows if you throw in a mentally challanged main character or uglify a hot actress you're 10 times more likely to win the Oscar.
Yeah, I was hopping mad when I saw how Ron Howard used CGI to digitally reduce Jennifer Connolly's bountiful bosoms in "A Perfect Mind". Anyone who saw her in "The Hot Spot" and "Career Opportunities" knows that something big was missing in Howard's film. Look, it was kinda neat how they removed Gary Senise's legs digitally in "Forest Gump" but removing the breas
Re:Jennifer Connolly in "A Beautiful Mind" (Score:1)
maybe, but we'll always have her at her beautifully big-breasted best in "The Rocketeer" [imdb.com] and "Requiem" [imdb.com].
Re:Jennifer Connolly in "A Beautiful Mind" (Score:1)
Dark Water [imdb.com]
I knew ya could.
KFG
Re:Well, duh (re: Hollywood) (Score:5, Interesting)
From TFA: "The Hollywood Stock Exchange gives traders just enough information to be able to play the market."
You don't have to worry about risk to predict the success of a movie.
To do predictions for something like pharmaceuticals, you need vastly more technical information... something that pharma companys are loathe to part with (results of unreleased clinical trials for example).
Otherwise, you're just guessing at the risks involved.
Re:Well, duh (re: Hollywood) (Score:2)
Linky for the lazy (Score:1)
Google (Score:2, Interesting)
Re:Google (Score:2)
Apply this to CS (Score:3, Interesting)
Or, we could do this with Linux Distros so we know which ones we should just abandon before wasting all our efforts.
Re:Apply this to CS (Score:2, Funny)
DistroWatch.com (Score:4, Informative)
Not new, but fun. (Score:2)
I find these games entertaining on some small level. I've played Tradeover [tradeover.net] a little bit while I'm at work, that's a more realistic stock game. It would be stupid though to base the actual markets on the game, it's meant to work the other way around.
Big money moves the markets. Wherever the big money goes at the point of sale is what matters mo
Re:Not new, but fun. (Score:1)
Karnak says: (Score:1)
A:
the gullibility of the american public, the inability of business groups to decide anything for themselves and the first step to trashy AI created and produced movies for mass consumtion.
Q:
What do computerized predictions really predict?
May the dung beetles from 1000 camels crawl up your man-dress!
(Apologies to Johnny Carson and American Dad)
-What's the speed of dark?
Perception and reality (Score:5, Insightful)
Perception and hype are not the same as reality. For instance, TB kills more people than AIDS, yet which is perceived to be more important to treat? There's a lot of discussion and hype about breast cancer, yet prostate cancer is more serious.
Perception drives our irrational thinking.
Re:Perception and reality (Score:2)
Perception drives our irrational thinking.
IMHO, nothing changes perception quite like losing something of value (eg, money).Re:Popularity vs. knowledge? (Score:1)
Well, the market seem to sift out players that make more or less arbitrary trades. If you can't identify any valuable traits of the stocks in the market, you will eventually to loose your (virtual) money. From the perspective of the player who looses, one can argue that very few people like to play any game where the results of their actions seem arbitrary (because they don't understand the game) and the loose. From the m
More serious example (Score:5, Informative)
Re:More serious example (Score:3, Informative)
That was important because if you want people to really make these markets work, there has to be some incentive for them to do so.
Re:More serious example (Score:2)
Re:More serious example (Score:2)
Terrorism Futures Market (Score:5, Informative)
Re:Terrorism Futures Market (Score:2)
Re:Terrorism Futures Market (Score:2)
Re:Terrorism Futures Market (Score:1, Informative)
A great book, The Wisdom of Crowds, goes over why futures markets work so well. Things ranging from judging the weight of a pumpkin to predicting within minutes of the Challenger disaster that the O-rings were responsible, have been foretold by futures markets or simple version of them.
http://www.amazon.com/gp/product/0385721706/ [amazon.com]
Re:Terrorism Futures Market (Score:2)
1. Not enough traders. Who's going to provide the liquidity for such a market? Where are the large mass of uninformed traders that provide the impetus for better informed traders to take advantage of their status? What's the bid/ask spread going to look like? Where are the market makers going to come from? It's worth noting that Tradesports does really well (high-volume) on things like sports and very poorly on wonky political happenings
Re:Terrorism Futures Market (Score:2)
I don't think the problem was whether or not it would have worked. The trouble I see it is that a market would mean a lot of money riding on whether or not a terrorist act was committed. Which in turn creates a financial incentive for people to commit attrocities who wouldn't
Re:Terrorism Futures Market (Score:2)
This was addressed in the original market. The amounts of money traded would be limited so there wouldn't be half a billion dollars riding on such events. Plus, if the price does rise substantially on such a contract, it should be a clear warning sign. The market actually functions better if the terrorists and other insiders trade.
This form of moral hazard isn't restricted to just terrorism. For example, stock option markets have similar problems. If there's enough options riding on a company, then it bec
Re:Terrorism Futures Market (Score:2)
Interesting. I wonder how that would affect the performance of the market.Is the original proposal online anywhere? I have to say, I never saw it.
Re:Terrorism Futures Market (Score:2)
Interesting. I wonder how that would affect the performance of the market.Is the original proposal online anywhere? I have to say, I never saw it.
Dr. Robin Hanson, one of the founders, has some details on it. I couldn't link to that directly (URL doesn't work at the moment), but here's a good discussion [af.mil] of the market including the complaints.
We're talking about giving corporate money a legitimate pretext to buy and sell violence. I can't help but worry that this would act to increase the overall supp
Re:Terrorism Futures Market (Score:2)
Thanks, I'll look forward to reading that.
Yes, you said that limiting the supply of options in the options market eliminated *most* of the illegal activities. Which is probably a fair trade off when the commodity is oranges or shares in SCO.
Re:Terrorism Futures Market (Score:2)
Ok, Robin Hanson's home page is here [gmu.edu], but it's still down. If I recall correctly, you have to click through to his personal page and then there's some betting markets related stuff. The PAM (Policy Analysis Market) stuff should be around there.
Yes, you said that limiting the supply of options in the options market eliminated *most* of the illegal activities. Which is probably a fair trade off when the commodity is oranges or shares in SCO.
But not so when it's airlines and reinsurance companies?
Readi
Re:Terrorism Futures Market (Score:2)
Thank you. The other link you sent me was very interesting.
I was thinking more of explosions and assasinations, my
Re:Terrorism Futures Market (Score:2)
By limiting the players, the size of the bets and by only allowing the pentagon to issue bets, the exercise seems more like a focus group with propaganda opportunities rather than a proper market.
Given what actually happened, I'd have to say the propaganda opportunities just weren't there. but you have a fair criticism. The more constraints you place on a market, the less relevant it becomes. Still, it would have consisted of a fairly large pool of people in government, academia, and elsewhere. So ther
Speaking of HSX... (Score:1, Offtopic)
No real money involved? (Score:4, Interesting)
I just did a search and found two but I am not sure if they are any good:
http://www.intrade.com/ [intrade.com] where you can in many political, entertainement and world events
http://www.tradesports.com/ [tradesports.com] Mostly sports but also a bit of world events
Re:No real money involved? (Score:3, Funny)
Yes, try this one [nyse.com]. They don't explain it too well, but you're wagering on whether given companies will meet, surpass, or fail to meet others' expectations of how they'll perform. Sometimes you're even wagering on just how they'll perform, but normally you're wagering against how others think they'll perform -- that is, can you guess better than everyone else?
Re:No real money involved? (Score:2)
Now I also just notice that booth links seams to be from the same company so before anyone say the second most obvious comment: "are you promoting your own web site/company", I'll say no, but if you don't believe me I'll say: "Do you want bet 100$ on that?".
Re:No real money involved? (Score:2)
The wikipedia article will give information plus a lots of links a the bottom http://en.wikipedia.org/wiki/Prediction_market [wikipedia.org]
This resource will give you lots of links for real money and play money markets http://www.chrisfmasse.com/3/3/exchanges/ [chrisfmasse.com]
Unfortunately after looking almost all the real money links I found no site that appear to be mainstream enough. However many of the play money ones seams fun and it cost nothing to try so enjoy!
Re:No real money involved? (Score:2, Informative)
One is the idea (which I shared for a while) that the majority on any contract position is almost always right -- read the news stories, after all, they all suggest the prediction markets are damn near infallible. But the majority position may be all wrong for most of the life of the contract and then rea
Re:No real money involved? (Score:2)
Is this the most popular site of its kind? Is there a bigger competitor somewhere? I'll keep looking and post it if I find something in cases anyone wants to know.
Re:No real money involved? (Score:1)
Re:No real money involved? (Score:2)
Re:No real money involved? (Score:2)
Old field (Score:5, Interesting)
This sparked the idea that the knowledge of the whole group can lead to better answers than the knowledge of a select group of experts. It's also been shown to be true with things like artificial intelligence and mathematical proof programs.
So it seems like hollywood and the like have just finally realized that the entire group of people can do better at predicting movie success than just some panel of marketing experts.
Re:Old field (Score:2, Informative)
Re:Old field (Score:2)
Everyday predictions (Score:1, Informative)
My Prediction (Score:2)
The article didn't mention the flu market... (Score:4, Interesting)
The "Delphi Effect" (Score:3, Informative)
It is technically known as the Delphi Effect, and you can read more about it here:
http://en.wikipedia.org/wiki/Delphi_effect [wikipedia.org]
ttyl
Farrell