> This political stock market poll is a nice
> illustration of the
> problems with the EMH - the old joint hypothesis
> problem. No doubt
> the movement of prices quickly represents changes in
> opinion. But
> whose opinion?
Heheh. Mine for one (full disclosure: I now have a long position in Gore, though I actually put it on on Sporting Index). I think what you're getting is the opinion of pro gamblers, bored day traders and political pundits. But at least the pundits on this one have to pony up, unlike the btds hanging around in the studio waiting 30 minutes to see which way the wind is blowing
> Do we know that the players are
> representative samples
> of the masses, or that they're particularly
> well-informed about what
> the nonplaying masses think?
1) No and 2) Yes. If you think that anyone can call elections (and if we don't then Carrol's right and this thread might as well pack up and go home), then a stock market is as good a way as any to extract information about the opinions and degree of confidence of a pool of people, while giving them the incentive to say what they think, rather than what they want to believe.
>Seems like a good
> example of what Keynes
> wrote about in chap 12 of the GT - the game of
> anticipating what
> common opinion will be.
>
Yeh, but there's a bit of evidence that elections actually do behave in the same sort of way -- the bandwagon effect, etc. And it's less of a problem than in a stock market because there is actually a final reckoning; what we're betting on is a dated future event that none of the players can significantly affect, so there's a cut-off on the law of iterated expectations. I bet someone's done analysis on markets of this type, but I haven't read it. They're good at predicting football matches, and Iowa claim to have good backtesting, but every bugger in the market claims to have good backtesting too, and we're still here working for a living.
cheers
dd
> Doug
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