I wouldn't put too much stock in Intrade. It can be very easily manipulated, and Roms' camp might be doing just that--
Here’s the backstory: On Monday night, after the debate, Barack Obama was leading Romney on Intrade by around 60 percent to 40 percent. But at around 10:00 a.m. on Tuesday morning, Romney had surged to nearly 49 percent. Was this evidence that the conventional wisdom was wrong? Had Romney actually won the debate handily? Or, alternatively, was the nosedive in the stock markets putting a dent in Obama’s re-election chances?
Or maybe it was something else. As economist Justin Wolfers pointed out on Twitter, the huge swing toward Romney appears to have been driven by a brief burst of trading, with someone spending about $17,800 to push Romney’s chances on Intrade up to 48 percent. But the surge only lasted about six minutes before other traders whittled the price back down to what they saw as a more accurate valuation. Romney’s odds of winning are, as of Tuesday morning, back at around 41 percent:
As Wolfers pointed out, this mysterious trader ended up overpaying by about $1,250 for shares that subsequently collapsed in value. Was this just someone who made an expensive trade? Or was somebody trying to influence Intrade odds in order to sway perceptions of the race? And, if so, was it worth $1,250 to jolt the markets for less than 10 minutes?
The whole idea of manipulation may seem like a bizarre conspiracy theory, but this isn’t the first time weird swings on Intrade have occurred. In October of 2008, Intrade revealed that a single investor had been engaging in massive purchases of John McCain shares, seemingly in order to bolster the candidate’s standing in the prediction markets:
Of course, that leads to a broader question. Are betting markets really so important that they’re actually worth manipulating? Sure, Intrade did remarkably well in predicting the final electoral vote count of the 2008 election. But as Alex Klein argued last year in The New Republic, prediction markets are far from omniscient. Investors are largely compiling information that’s already out there, such as polling data. The site does less well for more inscrutable events. (Intrade, for instance, suggested there was an 80 percent chance that the Supreme Court would overturn Obama’s health care reform.)
So Intrade isn’t perfect. Still, the betting market on the presidential race has been highly active this year. And the fact that prediction markets are seen as worth swaying suggests that more and more people now see them as highly influential.
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