Assorted links

by on September 12, 2008 at 10:42 am in Web/Tech | Permalink

1. How to judge a popular book in 90 seconds or less.  It usually takes me less than five.

2. Does InTrade have a Republican bias?

3. The most overpaid actors and actresses?

4. Douglas Holtz-Eakin on taxes: the truth.

5. My colleague Dan Rothschild has a new blog covering Ike and Houston.

6. An awful Op-Ed.

1 caveat bettor September 12, 2008 at 10:59 am

InTraders have a ponderous free-market bias. I think that correlates us with one major party more than the other.

But take heart: Bush Derangement Syndrome is well represented, at least in the pre-spinoff Tradesports chat pit.

2 Christopher September 12, 2008 at 11:25 am

The Heuristics choosing a book to read seems a little onerous. I’ve I got just two rules for judging a book by its cover:

1. If the author is on cover, and its not a autobiography/memoir or humor book, the book is going to be crap and isn’t worth the time and money to read or even glance at.

2. If they put “Ph.D.” or “M.D.” after there name, it going to be crap and isn’t worth the time and money to read or even glance at.

3 Richard Sharpe September 12, 2008 at 11:57 am

I have a hard time believing that those who play on InTrade and other political futures markets are actually representative of those who will vote in November.

Where’s the data?

4 y81 September 12, 2008 at 12:51 pm

Maybe caveat bettor and burger flipper have answered my question: if liquidity is low (meaning you can’t make big bets) and entrance fees are high, it won’t be worth anyone’s time to arbitrage between markets. And indeed, an activity that returns $10,000 for several months work would not attract me. (Obviously, I don’t know how many actual hours Adanthar spent to make $10,000, but if it was more than 50 to 100, most of us can do better.)

5 David Shor September 12, 2008 at 12:56 pm

All of these markets have a pretty large amount of liquidity, so the large difference in price is very bizzare. Robin Hanson suggests that the inability is a sign of insufficient investor incentive to respond to arbitrage opertunity.

This is possible, but I think the problem is likely capital constraints. There have been, approximately, 144 thousand trades on the “McCain wins” contract in the last week, mostly after the convention. If that consists of a huge number of enthusiastic McCain supporters who over-estimate the probability of victory, it would require a huge amount of capital(Well, not much on a global scale. But I doubt Hedge Funds are involved on Intrade) to cause prices to converge to true levels.

It seems that volume has spiked on the other markets, so I think its fairly likely that the number of “Buy Obama on Intrade, Short Obama on [other market]” has been fairly high, but still unable to counteract the wave of Pro-McCain enthusiasm that has hit intrade.

So Democrats should not be too worried about McCain surging ahead on Intrade. Give the markets a week or two to settle down and build capital.

6 houstonmike September 12, 2008 at 1:27 pm

Re: Ike and Houston. Here’s a plug for the best weather (hurricane) analysis, I’ve found. Well written, replete with explanations of all aspects of hurricane dynamics, and forecasts that have proved to be very accurate within the limits of the science and are current ability to forecast multifactorial events like this. Jeff Masters is a University of Michigan meterologist and former Hurrican Hunter team member

7 caveat bettor September 12, 2008 at 3:02 pm

Dave Shor: As a person who has a hedge-fund type job in an investment bank, I’d have to say that hedge funds and investment banks haven’t been able to find fair value for, say, a credit derivative, for about a decade now.

Fortunately, I’m on the equities side. Margins are thin, but I haven’t blown up (yet).

Great site, btw.

8 Ed September 12, 2008 at 4:05 pm

Re: InTrade bias…

We all know that polling data is taken very seriously by those with money on the InTrade exchange. That’s evidenced by the plot of state-by-state trading price vs. poll results. [1]

Can someone please explain to me why the distribution in that plot is best fit with a Logistic Curve? [2] (As opposed to say, an Error Function or some other shape?) [3]


9 David Shor September 12, 2008 at 6:26 pm

To Ed;

I can’t get a picture of the map, the site is down. But I suspect it actually is fit better by something like an error function.

The voteshare that a candidate will get in a state, with polling average x(poll averaging is a bit complicated, I go over this on my site), can be modeled really well by a normal distribution V~N(x,sigma) if you assume polls follow a random walk.

So probability of victory(and corresponding price of the contract), is going to be P(V>.5)=[Some mess involving the cdf of the normal, which follows an error function].

The error function looks a lot like a logistic curve, so that might be it.

Of course, it could be logistic. But I’d want to do some chi-tests before I say anything.

10 pants September 12, 2008 at 10:45 pm

How very clever of the WSJ author…When you can’t find a correlation to imply causation from, you make up a correlation and then imply causation. Aspiring economagicians take note!

11 Jim Rockwell September 13, 2008 at 1:42 am

I’m actually confused by the attacks toward the op ed … I don’t think he is inventing the correlation at all, or even supporting the correlation he has found. He’s merely taking on a ridiculous statement that has found considerable traction amongst the left wing bloggers and pundits, who continually trot out the obnoxious line that the economy or the stock market have done better under democratic presidents. Luskin is just showing that, by that very simplistic reasoning, the opposite could be true. I don’t think is trying to say that people should buy into his point as a way of explaining how the economy works, but rather to burst the bubble of the talking point that he originally took on.

12 John September 13, 2008 at 3:47 am

The op-ed is correct 90% of the way, undercutting some overly-simplistic views of the (sparse) data in a way that non-economists can get a handle on — but then draws some too strong conclusions right at the end.

13 Quinton September 13, 2008 at 10:32 pm

Wait…so are the people against the op-ed actually advocating the viewpoint that the American economy does better under Democratic presidents BECAUSE they are Democrats (and not Republicans)?

I interpreted the blogger to simply be ridiculing an obvious case of causation/correlation mix-up. Although, from what is quoted, I’m not sure whether the article advocated this stance, and I’m too lazy (and enthralled in my football game) to read it right now. But as for the blogger being on McCain’s team, why would he mock the article for trying to switch presidential party affiliations if that were so? The “data” presented a strong case for Democrats, and by mixing presidents, the article made it sound like Republicans were, in fact, better for the economy/market. If our blogger friend supports McCain, would he mock this point?

Also, I interpreted Tyler’s labeling the link as an “awful Op-Ed” as referring to the opinion of the blogger towards the WSJ article, not his own towards the blog, but I could be entirely mistaken.

14 cheap holic gold January 2, 2009 at 12:43 am

And the more cheap holic gold is very good for you.

15 kate May 15, 2009 at 4:34 am

wast of time

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