Chris F. Masse November 12th, 2008
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Nigel Eccles is calling HubDub.co.uk his home.
Let’s scan his Press release for interesting bits:
We’re delighted to be able to offer our UK Hubdubbers their very own UK Edition of Hubdub. Now Hubdubbers based in the UK can now see news stories that other UK users are predicting on, simply by selecting the UK Edition at the top right of the home page.
Interestingly, the US site’s most popular stories today are all around the Presidential Inauguration and Obama’s cabinent appointments, while the UK site’s top listings are X-Factor, Strictly Come Dancing and Everton v Middlesborough. What does this say about the UK, I wonder? 
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Here is the press release that we issued today in the UK:
Edinburgh, 10 November 2008:
News junkies in the UK can now get an additional fix, by predicting the outcome of news stories – engaging in news stories instead of just reading them.
Users of Hubdub, which launches in the UK today, use a pot of virtual money to place bets on the outcome of any of over 2000 running news stories, covering the likes of politics, sport, business and entertainment.
Since launching earlier this year in the US, Edinburgh-based Hubdub has garnered a substantial and loyal following, with over 200,000 unique visitors per month, 800,000 predictions to date and over 2 million Hubdub dollars staked every day. Some users are spending several hours a day on the site, with many of them confessing to a definite Hubdub “addiction” on the site’s forum.
The fact that it’s Hubdub dollars at stake is apparently irrelevant [2] – Hubdub users are so competitive that the most important thing is that they prove they were right to the rest of the vibrant community. How much is won or lost depends on not only how the news story turns out, but how others have predicted the outcome. Groups of friends can set up their own, dedicated leaderboard to show who has predicted most accurately.
Globally, prediction markets, the mechanism behind Hubdub, are becoming increasingly popular. In the US, the Presidential election sent the numbers of users soaring. They have proven to be more accurate than polls [3], and because they respond in near real-time to developing stories [4], more agile too. Indeed, Hubdub successfully predicted the final voting results of the US election where the majority of polls and pundits failed. [5]
Lesley Eccles, one of the founders of Hubdub, commented: “It’s great to be launching in the UK, despite the recession. People are going to be looking for free entertainment and will turn to the web to find it. Hubdub is free, exciting and keeps you informed. In addition, news sites are looking to engage and interact further with their readers and Hubdub gives them a fantastic means to do so.”
Having secured partnerships with leading media news sites including Reuters and The Independent, Hubdub is taking prediction markets more mainstream and making them easier for casual browsers to appreciate. Sitting beside high quality news content, Hubdub provides news sites with additional ways to engage their readers, keeping them online longer and returning on a regular basis.
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[1] Interesting stats. Does it tell more about the Americans versus the British, or more about the HubDub’s SEO results?
[2] I agree with that, in part. I would like to see HubDub offering prizes to traders, as NewsFutures does.
[3] Scottish approximation. It should be said that prediction markets do slightly better than the polls, in a very long series of comparisons.
[4] Yes, a prediction market is an information aggregation mechanism, but its value is limited. It is valuable to the busy people. But the real value of the prediction markets have yet to be demonstrated. (I have my own idea.)
[5] Scottish exaggeration. I don’t like this way of assessing the electoral college predictions. The InTrade and HubDub prediction markets got both Missouri and Indiana wrong (so to speak, in a non-probabilistic way), but, as those 2 states has the exact same number of electoral votes (11), this double mistake cancels itself when you assess only the total number of electoral votes. The InTrade and HubDub prediction markets can claim that they got the number for Barack Obama (almost) spot on (they predicted 364, with the “leaning” method –he will get 365, actually, because of one additional Nebraska electoral vote) —but that’s because their mistakes on Missouri and Indiana cancel themselves perfectly. I call that “luck”.
TAKEAWAY: To find the real social utility of the prediction markets, we need to go beyond the propaganda churned out by the exchange executives and their courtesans.
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APPENDIX:
Here’s a visual post-mortem of the 2008 US presidential elections.
Pay attention to Missouri and Indiana.
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A) InTrade, on November 5, 2008 (screen shot taken at 2:00 am):
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Prediction Markets & State Polls, on November 4, 2008:
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B1) Prediction Markets (on November 4, 2008)
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InTrade (screen shot taken at mid-day ET, November 4, 2008):
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InTrade (screen shot taken in the morning, November 4, 2008):
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BetFair (screen shot taken in the morning, November 4, 2008):
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HubDub (screen shot taken in the morning, November 4, 2008):
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B2) State Polls (on November 4, 2008)
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Karl Rove (on November 4, 2008):
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CNN (on November 4, 2008):
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Pollster (on November 4, 2008):
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Electoral-Vote.com (on November 4, 2008):
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Nate Silver (on November 4, 2008):
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PREDICTION MARKET PROBABILITIES
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Explainer On Prediction Markets
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A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative represents the imputed perceived likelihood of the partially uncertain event (i.e., its aggregated expected probability). A 60% probability means that, in a series of events each with a 60% probability, the favored outcome is expected to occur 60 times out of 100, and the unfavored outcome is expected to occur 40 times out of 100.
Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism —with or without an automated market maker.
Prediction markets enable us to attain collective intelligence. Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that the traders bring when they agree on prices. The event derivative traders are informed by the primary indicators (i.e., the primary sources of information), like the polls, for instance. These informed speculators then execute their transactions based on their anticipations about the future —anticipations that will be either confirmed or infirmed.
The value of a set of prediction markets consists in the added accuracy that these prediction markets provide relative to the other forecasting mechanisms, times the value of accuracy in improved decisions, minus the cost of maintaining these prediction markets, relative to the cost of the other forecasting mechanisms. According to Robin Hanson, a highly accurate prediction market has little value if some other forecasting mechanism(s) can provide similar accuracy at a lower cost, or if very few substantial decisions are influenced by accurate forecasts on its topic.
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More Info:
- The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts
- Prediction Market Science
- The Midas Oracle Explainers On Prediction Markets
- All The Midas Oracle Explainers On Prediction Markets
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Tags: 2008 US presidential elections, accuracy, Barack Obama, BetFair, betting markets, event derivative markets, Forecasting, HubDub, InTrade, John McCain, prediction accuracy, prediction markets
