Arbitrage opportunities stayed open in the seat-by-seat markets in the
last Australian federal election for quite some time. I wrote some
code that scraped the Australian internet bookmakers web sites once
every 24 hours and looked for cross-bookie and/or inter-temporal under-
rounds, dumping them to tables etc...some reports appear if you scroll
through:
http://jackman.stanford.edu/blog/index.php?s=arbitrage
But even worse, you can't do business on the Australian internet
gaming sites with an IP address thought to be in the USA, nor with a
credit card issued to an American bank etc etc.
There was more money to be had if you'd been willing to play a longer
game and assume some exposure. Labor were long odds about 18 months
out from the Nov 2007 Australian election; by mid 2007 the tables had
turned and you could have staked out a very nice risk-free profit,
although not paid out until after the election.
-- Simon
On Sep 9, 2008, at 6:37 AM, Kenneth Benoit wrote:
> Hi - In the UK and Ireland where betting is legal, bookmakers offer
> odds for these things and in many cases (as a political scientist)
> it is possible to outsmart the bookies who frequently get it wrong
> -- they thought the referendum on the Lisbon Treaty would pass for
> instance.
>
> But the current odds as of today -- see http://www.electionbetting.com/
> -- were:
> Barack Obama 4 - 7
> John McCain 5 - 4
>
> So James your €80 placed on McCain would yield only €100, which
> suggests that Patty is closer to the profit-seeking bookmakers' odds
> than Intrade, which appears to have offered a very good deal on
> McCain at $.40.
>
> Oops above I meant to say $80, which only yields enough in € to buy
> half a latte at a Dublin Starbucks. Note that Paddy Power is also
> offering Paris Hilton for president at 1000 - 1, which I'll bet
> Intrade doesn't have!
>
> Ken
> http://kenbenoit.net
>
>
>
>
>
> On 8 Sep 2008, at 17:26, James Fowler wrote:
>
>> I thought I would share briefly an experience I had at APSA.
>>
>> At the time, the prediction market Intrade (http://www.intrade.com)
>> showed a $1 contract on John McCain was priced at $0.40 --
>> suggesting the market believed McCain had a 40% chance of winning
>> the election. At Sunshine Hillygus, Maggie Penn, and John Patty's
>> "Kickin' APSA" party, Patty seemed pretty confident that the market
>> was wrong -- he was willing to bet me $100 at even odds that McCain
>> would win.
>>
>> Today McCain actually briefly climbed over $0.50 -- so maybe Patty
>> was right.
>>
>> But it doesn't matter -- immediately after APSA I bought 200 shares
>> of McCain at Intrade for $80.
>>
>> If McCain wins, Intrade will give me $200 and I'll give $100 to
>> Patty. Net profit: $20
>>
>> If McCain loses, Intrade will give me nothing, but Patty will give
>> me $100. Net profit: $20
>>
>> I love risk-free investments (though I guess I should have checked
>> Moody's credit rating for Patty....).
>>
>> And, in a way, I am also partially responsible for the McCain
>> market moving up. My arbitrage moved the market exactly the way it
>> is supposed to, integrating Patty's expert intuition into the price.
>>
>> That's why I use prediction market prices instead of poll
>> aggregates in my own research to measure electoral probabilities (http://jhfowler.ucsd.edu/elections_and_markets.pdf
>> ). Investors might have partisan biases, but there are always
>> people like me willing to arbitrage them away....
>>
>> :)
>>
>> james
>>
>> James H. Fowler
>> UC San Diego
>> http://jhfowler.ucsd.edu
>>
>>
>>
>>
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Professor Simon Jackman,
Depts of Political Science & (by courtesy) Statistics,
Stanford University, Stanford, CA 94305-6044, USA.
http://jackman.stanford.edu
Director, Political Science Computational Lab. http://pscl.stanford.edu
Director, Methods of Analysis Program in the Social Sciences, http://mapss.stanford.edu
cell: +1 (650) 387 3019 fax: +1 (650) 724-9095
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