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November 1, 2007

Ron Paul Intrade Update

by Brad Warbiany

As I’ve explained previously, and for reasons I’ve explained previously, I tend to trust prediction markets much more than polls as predictors of events like elections.

As the below graph shows, Ron Paul has made some steady progress since early this year, when he was a near-penniless candidate whose name brought out only blank stares from people asked about him.

He’s still trailing Il Duce by quite a margin, and he appears to be getting a boost from Fred Thompson’s implosion. It now appears to be a race between Giuliani, the front-runner, Romney in second, and Paul as the dark horse.

The money and the name recognition is starting to come, and media appearances such as that on The Tonight Show will only help. Now it becomes a race against time, to see if he can put the money to use by the early primaries in January, where a good showing is crucial if he’s going to have a chance at the nomination.

Right now, he’s trading at about a 7-8 share on Intrade, which is about a right considering his relative obscurity. I’d like to see his numbers on Intrade rising above a 10 share by the beginning of December, a month from today. If he can take that and build into the low-mid teens by the end of the year, I’ll take it as a sign that he’s got enough name recognition to make a play in the early primaries. But to have a shot, he needs to jump out of the internet and into the American home, and the next two months will determine if that’s a reality.

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37 Comments

  1. Brad,

    Interesting, but don’t you think that most of the Intrade participants are making their bets based on the same information that the rest of us are basing our hunches ?

    I say that because, at quick glance, it looks like the numbers in Intrade roughly correlate to overall poll standing and/or fundraising.

    Until people actually start voting, are their bets any more reliable than the guesses from they Sunday morning talk show crowd ?

    Comment by Doug Mataconis — November 1, 2007 @ 9:57 am
  2. Pau’s intrade is now at 9 and has passed Thompson.

    Comment by Kaligula — November 1, 2007 @ 9:59 am
  3. Doug, the difference is motive. The MSM has a number of motives, most of which lead them to be little more than an echo chamber. Intrade participants are in it to make money, nothing more, nothing less. They have every incentive to do due diligence and they are steadily discovering that Paul’s stock is undervalued.

    Comment by Jeff Molby — November 1, 2007 @ 10:33 am
  4. Jeff,

    Hammer, meet Nail.

    Comment by Brian T. Traylor — November 1, 2007 @ 10:36 am
  5. Jeff,

    Then what, outside of the same polls, fundraising reports, MSM reports, and blog postings do the people at Intrade have access to ?

    My point is, that if they are basing their bets on the same information everyone else is, then their conclusions aren’t necessary any more correct.

    Comment by Doug Mataconis — November 1, 2007 @ 10:52 am
  6. doug,

    people on tv get paid to lie. participants on intrade get paid if they are right. big difference.

    actually Paul’s price has been anticipating future increases in the phone polls pretty consistently. on the other side Thompson’s decline in the polls was easily forecasted by the bearish chart pattern that started to develop over the summer.

    my name links to a mb thread I’ve been keeping. the initial post I wrote in later august and was a pretty darn accurate medium term outlook. since then I’ve been faked out a couple time though. I’ll update the thread shortly.

    Comment by Kyle — November 1, 2007 @ 11:00 am
  7. I think the point is that when money is involved people tend to utilize more and better resources. rather than get a quick update from fox news and some major polls, they are looking at information that is freely available, but not necessarily reflected accurately by these main stream sources.

    Comment by JL — November 1, 2007 @ 11:11 am
  8. People putting money on the line are less likely to be guided by wishful thinking or personal bias than pundits whose motives may be something other than simply saying what they think is correct.

    Not that complicated. Even a simple country traffic court lawyer could understand it.

    Comment by Buckwheat — November 1, 2007 @ 11:11 am
  9. “It now appears to be a race between Giuliani, the front-runner, Romney in second, and Paul as the dark horse.”

    I think it’s even murkier than this. Giuliani’s “support” is a very strange thing — he draws no sizable crowds, has fewer than 200 meetup members nationwide, and has yet to win a single straw poll — indeed, his policy is now to sit them out because he kept attending them and not winning.

    Romney has spent $60 million and is still only at 10-12% in the polls.

    I think it’s safe to say only six men have a shot (Paul, Romney, Huckabee, McCain, Giuliani, Thompson), but I’d put the chances of Thompson, McCain and Huckabee lower than the other three.

    So yeah, maybe what Brad said. But really, I think Paul is going to run away with this. Except for the recent Huckabee boomlet, there is simply no enthusiasm for any other candidate.

    Comment by Buckwheat — November 1, 2007 @ 11:15 am
  10. Focus and totality, Doug.

    Assuming the SEC is actually doing it’s job, you have access to all of the same information as a stock trader, yet I can’t imagine you assume that you’re just as qualified to assess the viability of company XYZ?

    No one can predict the future of course, but if all else is equal, I put more stock in the cumulative actions of individuals with a direct financial incentive towards accuracy than the musings of any number of pundits.

    Is that not the essence of capitalism?

    Comment by Jeff Molby — November 1, 2007 @ 11:16 am
  11. JL,

    I know all about how Intrade works. And the idea that their predictions at this point might be more reliable than, say, James Carville’s, is apparent.

    But if we’re all relying on the same information, then its all just an exercise in naval gazing until the votes are cast.

    If there are any actual studies of the predictive value of these markets as compared to, say, opinion polls, I’d be interested in seeing them (although, if the polls are at least part of the basis for the predictive market’s valuation of a candidate, then it isn’t really a valid comparison)

    Comment by Doug Mataconis — November 1, 2007 @ 11:17 am
  12. Jeff,

    What’s the saying ? Past performance is not an indication of future results.

    It’s true of the stock market, and I’d bet its true of a market like this as well.

    My point, though, is that it doesn’t seem like there’s any more reason to believe these results than the polls that come out on a weekly basis, especially since there isn’t that much difference between the two.

    Comment by Doug Mataconis — November 1, 2007 @ 11:21 am
  13. Doug,

    Actually, the actual economic slogan is “Past performance is not necessarily indicative of future results.” The qualifying remark is kind of important since the actual phrase was meant to indicate that precedent simply offers no guarantees whereas your phrase seems to have implied that history is irrelevant and useless when doing objective analysis. The actual phrase would be the correct interpretation.

    Comment by UCrawford — November 1, 2007 @ 11:26 am
  14. Sorry, bad use of italics on my part. But my point remains unchanged.

    Comment by UCrawford — November 1, 2007 @ 11:27 am
  15. Brad,

    This is really interesting. Every other indicator to measure support says that Paul is doing much better than “polls” suggest. After learning how all polls are being conducted, I don’t think it’s at all unreasonable to assume them wrong. -And not only for Paul’s benefit, I think their method is severely antiquated and their inevitable embarrassing inaccuracy is going to be a hard slap in the face to the MSM. Land lines? Who the hell has those anymore? and out of the people that do have them, who keeps the ringer on and actually answers unknown callers and stays on the phone for a survey? The people being polled are out of touch old farts living in the stone age without cells or even caller ID!

    Comment by Billy — November 1, 2007 @ 11:30 am
  16. What’s the saying ? Past performance is not an indication of future results.

    Actually, the saying is “Past performance does not guarantee future results.”

    Past performance is one of the key indicators of future results and those with a financial incentive will study the past performance more thoroughly and their actions will have a higher predictive value.

    However, if you can’t tolerate any uncertainty at all, I suggest you check out these guys.

    Comment by Jeff Molby — November 1, 2007 @ 11:36 am
  17. Doug,

    Yes, I think it is more accurate than the polls. And yes, the polls are a component of how the market sets the price of Paul’s futures contract.

    The polls are a single component of information, that in certain places may or may not be accurate. Fundraising numbers are a single component of information. Etc etc.

    Intrade is the market’s way of aggregating that information into a single number, as well as accounting for trends. For example, Thompson is polling at 17% or so nationally, but only about 8 on Intrade. Giuliani is about 29% nationally, but about 41 on Intrade. Romney, at about 11% nationally, leads 17% Thompson with a 29 Intrade share.

    Polls tell you how many people currently plan to vote for a certain candidate. Prediction markets tell you what probability interested parties assig to the chances of something happening. They’re fundamentally two different numbers.

    For several reasons (some pointed out by other commentors), I trust a market assignment of probability more than I trust a talking head on the idiot box or a poll of people bored enough to answer their phone and talk to a pollster.

    Still, to be sure, an 8 share on Intrade is a long shot. But to me, the trustworthiness of the number is higher than that of a poll, simply based on the efficiencies of futures markets.

    Comment by Brad Warbiany — November 1, 2007 @ 1:53 pm
  18. Brad,

    I get the point, but I think you’d agree that the predictive value of something like Intrade is still speculative at this stage of the race.

    As I said to someone else, I’d be interested to know if there have been any comparative studies of the predictive value of markets like this vs. standard opinion polling during the course of actual campaigns.

    Given that this is a relatively new phenomenon, I’m going to guess the answer is no.

    Comment by Doug Mataconis — November 1, 2007 @ 1:57 pm
  19. FYI, just as an aside, I do think polls are accurate, in as much as they’re an important piece of static data. I think if the election were held today, the numbers would probably more closely approximate the polls than Intrade. However, Intrade takes into account the trends and other data not found in a poll. For example, knowing that Ron Paul is fundraising well, knowing that he’s blitzing NH and Iowa with advertising (and knowing how important those two states are to his chances), allow them to make a prediction based on that information rather than on polls alone.

    Comment by Brad Warbiany — November 1, 2007 @ 2:01 pm
  20. Brad,

    As I’ve tried to say more than once, the only thing that polls are good for right now is showing where the trends are — who’s rising, who’s falling, what issues are resonating with the public.

    Having spent more than enough time on the inside of campaigns back in the 80′s and 90′s, I can say that this is exactly what internal polls are used for.

    And for those who are skeptical about polling, ask yourself this — if the polls are so inaccurate, then why do campaigns at all levels spend so much money having them done ?

    Comment by Doug Mataconis — November 1, 2007 @ 2:19 pm
  21. I posted this video link of a brief Penn and Teller exposé on Frank Luntz on another thread. Frank Luntz is a pollster used by the fair and balanced Fox News.

    I realize it’s provocative and anecdotal, but I felt I should post it here as well because it demonstrates how polling is influenced by monetary concerns just as much as Intrade. Any polling organization interested in remaining in existence is going to try to produce results they can sell to interested consumers. So really, the most obvious difference I see between Intrade and traditional polling is the scope of consumers. Polling serves a smaller group of consumers, and is therefore subject to a larger risk of intentional subjectivity.

    Comment by Akston — November 1, 2007 @ 2:33 pm
  22. Doug,

    “if the polls are so inaccurate, then why do campaigns at all levels spend so much money having them done?”

    Probably because every other campaign does it and more recent innovations like InTrade can be slow to catch on because newer forms of statistical analysis often go against conventional wisdom and get rejected out of hand by people too set in their ways or resistant to change to investigate or accept new information gathering techniques. That position isn’t dissimilar from the position of ex-athletes or old sportscasters who bitch about Sabermetrics or statistical analysis of sports performance.

    Your argument isn’t an argument in support of polls, Doug, it’s an argument against finding more effective ways to analyze and map support, which is frankly a rather Luddite position for you to take.

    Comment by UCrawford — November 1, 2007 @ 2:34 pm
  23. I think it’s even murkier than this. Giuliani’s “support” is a very strange thing — he draws no sizable crowds, has fewer than 200 meetup members nationwide, and has yet to win a single straw poll — indeed, his policy is now to sit them out because he kept attending them and not winning.

    Your average Republican voter is a middle-class white man working full-time. He’s older than 30. He’s probably married and has children. He’s never heard of MeetUp and probably never YouTube, either. He spends little to no time on the internet.

    And, of course, straw polls are basically meaningless. My home state, NJ, had about 240,000 Republican voters in the 2000 primary, despite the fact that Bush had already locked up the nomination by then. The recent Jersey-wide GOP straw poll attracted about 200 attendents paying $18 each and meeting in a central location. Primary voting, OTOH, is easy and free.

    Comment by Joshua Holmes — November 1, 2007 @ 2:49 pm
  24. Crawford,

    I think you’ll find that, for the most part, political polling does a pretty good job when its used for what its intended.

    Your argument isn’t an argument in support of polls, Doug, it’s an argument against finding more effective ways to analyze and map support, which is frankly a rather Luddite position for you to take.

    Again, has anyone actually tested the predictive ability of these betting websites vs. opinion polling in a real-world situation ?

    Comment by Doug Mataconis — November 1, 2007 @ 2:55 pm
  25. The polls have very little predictive value this far in advance of the primaries. Several eventual nominees have entered November polling in the single digits. The polls, even if accurate, don’t tell us who people are planning to vote for at all. They show the current preference of largely uninformed people when pressed to make a choice by a pollster.

    Comment by Craig — November 1, 2007 @ 3:00 pm
  26. Doug,

    Such tests exist… For example, this paper appears to be exactly what you’re looking for.

    I might have to buy this one…

    Comment by Brad Warbiany — November 1, 2007 @ 3:11 pm
  27. Doug,

    I’m not saying that we should automatically accept the InTrade poll because it’s new, but I am saying that you’ve no real cause to automatically dismiss it simply because it’s not what everybody else uses. Innovation often flies in the face of conventional wisdom and proves it wrong…InTrade may very well be inaccurate, but the premise behind it (financial self-interest) should at the very least earn it some benefit of the doubt because the people who follow it have a vested interest in insuring its accuracy. If it turns out to be a load of bunk, I’ll be happy to write it off as just an example of wishful thinking, but until then I think it merits some consideration.

    “I think you’ll find that, for the most part, political polling does a pretty good job when its used for what its intended.”

    I’ve also found that, for the most part, polls often tend to come up short and are highly susceptible to the bias of the people creating and compiling them. They’re not nearly accurate enough for me to accept them as Bible or to cause me to close my mind to other possibilities that may hold more promise.

    Comment by UCrawford — November 1, 2007 @ 3:29 pm
  28. The arguments you make that are dismissive of InTrade are very similar to the arguments people made about Bill James’ methods when he tried to explain how EqA or secondary average or Win Shares were a much better indicator of a baseball player’s performance than batting average or RBIs or “clutch” hits.

    Comment by UCrawford — November 1, 2007 @ 3:33 pm
  29. Doug: “I think you’ll find that, for the most part, political polling does a pretty good job when its used for what its intended.”

    I think you’ll find that it’s often used incorrectly and in the wrong situations. An example of this would be polling the general public 12-18 months ahead of an election that only a very small subset are paying close attention to.

    At least with Intrade, you know the sample group is a group that is self-selected to be the ones paying close attention to the situation. That doesn’t free them of bias, of course, but it’s a very useful data point.

    Comment by Brad Warbiany — November 1, 2007 @ 4:01 pm
  30. Brad,

    The Intrade predictions market is good for measuring momentum at the moment. The reason why Ron Paul is doing so well lately is because he has been some positive media coverage with media appearances and debate performance.

    I would not use this to predict the outcome of the Republican nomination until about a week or so before the Iowa Caucuses.

    Comment by Kevin — November 1, 2007 @ 4:18 pm
  31. You’re all making this way more complicated than you need. Intrade’s numbers are more reliable than “scientific” polls because all incentive to cheat is eliminated when money is at stake. Pollsters are almost always paid to INFLUENCE public opinion, not REFLECT it. The pollster loses nothing if the results are incorrect. Gamblers, on the other hand, lose everything if they’re wrong.

    Just listen to kids argue about who’s faster, or smarter, or stronger. They all talk big until someone says lets put some money on it, and then all the charlatans shut up.

    Comment by MDKidd — November 1, 2007 @ 5:26 pm
  32. And for those who are skeptical about polling, ask yourself this — if the polls are so inaccurate, then why do campaigns at all levels spend so much money having them done?

    I don’t think anyone here is arguing that polls are generally inaccurate. Polls can be highly accurate and very useful if they are representative of the population of interest. What people here are wondering about is whether traditional phone polling is representative of the population of interest. I submit that land-line phone polling of “likely Republican voters” is not representative of those who will vote in primaries because it does not include those who a) do not use landlines, b) do not answer unknown numbers, c) do not stick around to answer pollsters’ questions when the phone is picked up, and d) are not considered to be a “likely Republican voter”.

    Comment by Brian T. Traylor — November 1, 2007 @ 6:27 pm
  33. Apologies, the last entry was directed to Doug.

    Comment by Brian T. Traylor — November 1, 2007 @ 6:31 pm
  34. I agree about the trend. It’s hard to trust polls when the pollers don’t put Ron Paul’s name in the poll. I do believe that Paul will place ahead of Huckabee. In third as you’ve predicted. nice article

    Comment by barry broome — November 1, 2007 @ 7:29 pm
  35. Try this paper… http://www.biz.uiowa.edu/faculty/trietz/papers/long%20run%20accuracy.pdf

    It’s main point: prediction markets are more accurate than polls; the farther away from an election the ‘more’ more accurate they are.

    Comment by jake — November 3, 2007 @ 1:45 am
  36. In fact, there are plenty of “prediction markets” already in existence, that have been in existence for a long time. Horse track betting and stock markets, to name just a couple. Given enough people, with enough data, over a long enough period of time, they can, and do, accurately predict future events. The question is not whether prediction markets are viable for making predictions. They are. The question is what are the right quantities of people with a financial interest, time and data to get a valid prediction.

    Comment by Eric — November 3, 2007 @ 10:35 am
  37. Ron Paul 2008. He is the last chance to make the US worth living in at all. We pay socialist level taxes but instead of socialism, we get war in perpetuity. Ron Paul will change that for America.

    Comment by Mick Russom — November 4, 2007 @ 11:06 pm

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