this may be why the prediction markets were so terrible at guessing brexit. Each participant was a kind of expert in said domain - not impassionate. Not random. Moreover, it's possible that the crowd view was self re-inforcing.
Absolutely correct. Please note up front that I no longer vote, and I don't really care who wins the election.
That said, I've been watching elections and presidential politics in the US very closely since Watergate. Trump is very likely to win this election. There are many factors in play that the pundit and pollster class don't understand, and don't seem to care to understand. In this scenario, both the large crowds (polls) and the moderate crowds (expert panels) are likely to miss the mark by wide margins.
This is not because the experts lack expertise, but rather because this election has some unusual features that have not been seen for a couple of generations at least, and their models (mental and statistical) don't seem to be taking account of that. Humans have a nasty habit of switching motives without notice.
as of 10pm in London last night, when one could reasonably expect it to be getting more accurate, it was at 11%. And 25% was in any case a very poor prediction considering these markets are supposed to be more accurate than polls.
>And 25% was in any case a very poor prediction considering these markets are supposed to be more accurate than polls
If the markets predicted 75% A vs 25% B and A always turned up, that would make them a poor prediction. Predicting 25% B may mean they're not making much of a prediction (since they're not so far off from 50/50), but it doesn't mean that B being the outcome is indicative of a the prediction being deeply wrong.
yes I know how sampling works. However as the uncertainty decreased, the prediction markets went in the wrong direction, rapidly on the last day and signficantly in the last week. This strongly suggests that there is an element of "herding" going on by what are supposed to be rational, atomic, individual, actors (the first two of those three assumptions were violated by profit incenctive, and a non-secret ballot, respectively, it seems). Hence I stand by my view that the prediction markets turned out to be terribly poor. You will admit that as final polls all hovered around 50%, if accurate (and they seemingly were), prediction markets should have been wildly swinging between, say 25/75 and 75/25. They were not. They were trending consistenly lower for brexit.
This does not imply polls are more or less accurate than prediction markets.
The way to measure that is to look at 100 cases where prediction markets predict 75% odds. If approximately 75 of them result in a winner, prediction markets are accurate.
Looking at a single data point and declaring a probabilistic predictor to be inaccurate is not even wrong.
but who is looking only at a single data point? We have more information than that, namely, the strongly consistent incorrect direction of the prediction markets, as the uncertainly decreased (40% to 25% in the last week, and 25% to 11% in the last day). It is clear that there was a feedback loop into the predictors. These markets appeared structurally biased towards the larger odds -> this is where the profit motive is possibly distorting.
