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Yet somehow those betting $20 on their team end up creating spreads that are remarkably close to the final scores in games. I've never heard of the UBC election market, perhaps there aren't enough people trading to make it accurate. After all someone has to take the other side of the trade. But if you were able to make money, then you should have kept exploiting every opportunity until the market reflected the true odds. That itself would have made the market accurate.

"I ended up doing very well cashing in on those arbitrage opportunities (hey, somebody had to do it) and by betting on the Bloc Québécois (their national vote share underestimated their share of seats)."

LOL.. I did the *exact* same thing and made out like a bandit. I also made a bunch of money on the NDP, on the theory that the other people in the market were disproportionately right-of-centre (and their purchases reflected their biases). I was right.

"The trouble was - as I noted at the time - it would have cost about $30 to send the implied probability of a Conservative victory to 100%. Since then, no trades have occurred, but blocs of bids and offers (in nice, round quantities - no hint of co-ordinated activity here!) have been placed as tripwires around the last closing price."

If you're so sure why don't you just sell the contract and make a nice profit?

I suppose I could, but that misses the point: the informational content of the market price would then consist of whatever I thought it should be.

I disagree. I am a fairly heavy ESM trader. I do agree that the market is thin. What does that mean? That means that pricing anomolies (such as the impact of a partisan big money trader) do happen. In thick markets, these anomolies disappear instantaneously. In thinner markets like the UBC ESM, these anomolies just take a little longer to work their way out.

For example if a partisan NDPer comes in and pushes the NDP popular vote contract up to 50 cents with lots of buy orders, then someone who happened to take a look at that particular moment would think that the market is not a very good predictor of anything. However, all it takes is **one** non-partisan, deep pocketed arbitrage minded trader to come in undo the anomoly. I'm happy to fulfill that role. If I logged in and saw that 50Cent NDP contract I would sell NDP until it got back down to the 'right' range. So long as my pockets are deep enough, I am happy to take those trades. But, I don't log in every day. So, if I were the only non-partisan trader (and I am surely not) then perhaps the anomoly might stick around for awhile. But, it would soon enough be undone by me or by someone else.

I suppose it would, eventually. But I'm much less confident that it would occur before some journalist would see the anomaly and say "Hey! Here's a big spike in the election market! I should bring attention to it!"

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