So think the outcomes point is the strongest here.
When I’m thinking about how seriously to take their prediction market percentages I consider:
Do the outcomes have the right incentives
Is there sufficient liquidity to think the number is a proper representation (maybe $1000 or M$1000)
Is the probability over 95% or smaller than 5% (in both cases it becomes much less clear)
Outside of that using prices as probabilities is fine.
Again your hedging bit is right but just rarely happens in the kinds of markets people quote on this forum.
Thanks for writing. I think you are technically right which is good.
I personally think the inflation section is just as important. People won’t make a long-term bet denominated in USD with an expected ROI lower than inflation. This also affects markets that aren’t 95% lopsided.
Yeah you’re right.
So think the outcomes point is the strongest here.
When I’m thinking about how seriously to take their prediction market percentages I consider:
Do the outcomes have the right incentives
Is there sufficient liquidity to think the number is a proper representation (maybe $1000 or M$1000)
Is the probability over 95% or smaller than 5% (in both cases it becomes much less clear)
Outside of that using prices as probabilities is fine.
Again your hedging bit is right but just rarely happens in the kinds of markets people quote on this forum.
Thanks for writing. I think you are technically right which is good.
I personally think the inflation section is just as important. People won’t make a long-term bet denominated in USD with an expected ROI lower than inflation. This also affects markets that aren’t 95% lopsided.
Yeah you’re right.