Wednesday, September 01, 2004

Would you buy this guy's stock? 

That's all for today. Go read Ed and John from the convention, and I leave you with today's Tradesports graph of the contract price for Kerry to be elected as U.S. President.

He's about as close to the White House as he was to Cambodia.

UPDATE (9pm): Blogger ate an addendum on this. Just as I posted that, Instapundit noted a post by Tom Maguire on the funny behavior of the Iowa Electronics Market, where Kerry closed to even money Tuesday from 46-54 down on Monday. It's important to recognize that IEM is a very thinly traded market. Many days their trade volumes are under $1000. Somebody who wanted to make a big buy of Kerry contracts or to go short on Bush -- perhaps even to move the number for purposes of news or blogging -- might be able to do this for $500. And given the ability to undo a trade within a few days, the amount of capital at risk is a fraction of this. So I don't agree with Maguire that it makes no sense for someone to manipulate this market -- I have an account there, and if I deposited $1000 to it, I could probably make some movements occur.

To get the idea, I drew this graph like a stock chart (a hi-lo-close with volumes). Look at the size of the volume on the 31st, when the contract changed.

The price has already returned to the 54-46 Bush advantage as of 8:42pm CT tonight (9/1). It will be interesting to see the volume. It's important to remember that the contracts are continuously traded -- there is no opening price like a stock would have, and what we're calling a "close" is really just the price that happened to exist at 11:59:59pm Central. The fact that the high price occurred at that time makes me a little suspicious that someone was "running the tape". Without access to continuous time data from the market, I have no way to prove that. So when Pejman says this is something Iowa needs to "remedy", I would argue we need to see the continuous tape before we know anything about that.

But it's pretty clear it's a thin market, and in thin markets one big trader can move a price. In contrast, while I don't have an average daily volume number on Tradesports, volume yesterday was $18,400, more than eight times the volume on IEM. As I noted above, there wasn't a big move on that market. And the fact that the Vote Share market on IEM did not move pari passu with the winner-take-all is another possible tipoff. (Indeed, volume on Pres04_VS was practically nil on the 31st.)

You might have a good deal of fun matching those moves in the Kerry contract price with news events, but I'll leave that one for another blogger. To save load times I won't post the Bush price chart, but if anyone wants it and the data, just mail the site.