Here’s an election day update of my post on conditional futures. What do the markets say about stock returns, nuclear weapons use and terrorist attacks in the U.S., contingent upon the winner of the temporary dictator election?
Unfortunately not much of anything. The market cited below doesn’t use real money and trading is very thin. Consider the answers below meaningless, just for fun (as is this post’s title).
The Economists’ Voice published Experimental Political Betting Markets and the 2004 Election a few weeks ago, which describes a real money contingent betting experiment. Unfortunately the claims aren’t very interesting — they aim to capture the potential effect of events on the election outcome (e.g., one expects that the capture of bin Laden would give Bush a tremendous boost). I’m interested in how people expect the election outcome to effect future events.
bid ask last
/ / /
46 57 47 http://www.ideosphere.com/fx-bin/Claim?claim=Bush04
Bush may not win.
50/.47 = 106 < 43
Bush win means much higher stock returns? However, bid and ask are much lower than last, so this must be the anomalous result of a very thin market. Taking the average of bid and ask:
26.5/.47 = 56 < 43
Bush win still means higher stock returns.
41/.47 = 87 < 44/.53 = 83
Bush win means slightly higher chance of US getting nuked?
30/.47 = 64 > 71
Bush win means very slightly lower chance of terrorist attack in US?
Taking the average of bid and ask:
49.5/.47 = 105 > 71
Bush win means greater chance of terrorist attack in US?
Addendum 2004-12-07: I just noticed that David Schneider-Jones posted a deeper analysis of the Nuke-related contracts above on November 1.