Just a moment...
But more recently, prediction markets have developed an odd sort of problem. There seems to be a feedback mechanism now whereby the betting-market odds reify themselves.
What do we mean by that? In the case of Brexit, it goes like this: Different surveys give different results, and we all know not to trust the polls, which have notoriously failed in... See more
What do we mean by that? In the case of Brexit, it goes like this: Different surveys give different results, and we all know not to trust the polls, which have notoriously failed in... See more
David Rothschild • Something’s Odd About the Political Betting Markets
I am also a fan of prediction markets, which can help identify the significance of events in real time , before the dust settles and there is consensus on which direction is which. The Polymarket on Sam Altman is very helpful in giving a useful summary of the ultimate consequences of hour-by-hour revelations and negotiations, giving much-needed con... See more
My Techno-Optimism
Because of the possible destabilizing effects of taking inaccurate predictive data too seriously, it is sometimes advantageous to omit prediction entirely, relying wholly on feedback, unless the quality of the predictions is high.
Herbert A. Simon • The Sciences of the Artificial
The interesting thing about financial markets is that so many systematic strategies are operating today. The reliance on experience and discretion is becoming less and less of the overall makeup of things. Passive flows are obviously taking over a lot and the active space is turning more systematic. To be fair, the market has become significantly m
... See moreCapital Flows • Brainstorms: Creativity and Complexity
Kaustubh Sule added
A preoccupation with wanting to be right or wanting to be perceived as being right, explains people’s tendency to focus on why the market is doing what it is doing instead of what it is doing.
Brendan Moynihan • What I Learned Losing A Million Dollars
One conceit of economics is that markets as a whole can perform fairly rationally, even if many of the participants within them are irrational. But irrational behavior in the markets may result precisely because individuals are responding rationally according to their incentives. So long as most traders are judged on the basis of short-term perform
... See moreNate Silver • The Signal and the Noise: Why So Many Predictions Fail-but Some Don't
Do not mistake a confident explanation for an accurate prediction.
An engineer can predict how much weight a steel bridge will hold and you can be quite sure reality will match their calculation. That's an accurate prediction.
Meanwhile, strongly held opinions about what will happen in markets or sports or politics have little predictive power. A lot... See more
An engineer can predict how much weight a steel bridge will hold and you can be quite sure reality will match their calculation. That's an accurate prediction.
Meanwhile, strongly held opinions about what will happen in markets or sports or politics have little predictive power. A lot... See more
Cleon added