TER now takes its monthly look at virtual markets. These are markets found on the Internet in which participants invest virtual money - no real cash - to make predictions or to assign value. These markets function like real stock and bond markets. If participants invest more in a given prediction or value, the "price" of that prediction or value gains; if participants invest less, the "price" goes down.
TER has been following the Hollywood Stock Exchange and some of the prediction markets at Inkling. (Disclosure: I do not participate in HSX, but I do participate in the Inkling markets discussed below except for markets that I administer - and I do not currently administer any markets.)
Hollywood Stock Exchange
TER has been following six actors on the Hollywood Stock Exchange: George Clooney, Halle Berry, Daniel Radcliffe, Rupert Grint, Emma Watson, and Gary Oldman.
Gary Oldman - Sirius Black in the Harry Potter films, among many other roles - has taken first place overall from Emma Watson - Hermione Granger in the Harry Potter films. Oldman rose from $220.81 to $225.22 per share, while Watson decreased from $221.85 to $216.81 per share. Daniel Radcliffe - Harry Potter - retains third place among actors at $195.47 (a slight decrease from the previous month), but fell to fifth place overall behind directors George Lucas and Andrew Adamson. Rupert Grint - Ron Weasley in the Harry Potter films - remains in fourth place among actors and sixth place overall at $172.83 per share.
George Clooney again gained, moving from $50.57 to $53.61 per share. Halle Berry also gained, going from $91.44 to $97.44 per share.
Much has changed in the Presidential race in the past month. Sen. John McCain (R - Arizona) has clinched the Republican nomination. In early December, Sen. McCain's chances were valued by the Republican nomination market at $2.86 per share - a 2.86 percent chance of success. Someone buying 100 shares in early December for $286 cashed out at $10,000 (virtual money, of course).
We're still in a major contest on the Democratic side between Sen. Hillary Clinton (D - New York) and Sen. Barack Obama (D - Illinois). What has become curious in the prediction markets has been the disconnect between different markets regarding the probability that one or the other will gain the nomination. I first noted this disconnect in a piece almost three weeks ago.
The market for the Democratic nomination itself currently shows Sen. Obama at $65.37 per share and Sen. Clinton at $34.62 per share - about 2 to 1 odds in favor of the Illinois Senator. The Presidential Election market, however, is much more bullish on Sen. Obama, showing him at $51.09 per share, or slightly better than 50-50 odds of winning the Presidency. Sen. Clinton is at $12.39 per share. These prices imply that Sen. Obama has an 80 percent chance of winning the Democratic nomination (51.09/(51.09+12.39)) - 4 to 1 odds in favor of Sen. Obama winning the nomination. The real odds cannot both be 2 to 1 and 4 to 1.
In the real world, a difference like this between real markets would be a major arbitrage opportunity - those who guess right would stand to make significant profits while those who didn't would face big losses. We'll see in the coming weeks how this sorts itself out.
Some new markets include whether Florida and Michigan will have new primaries, who will be on the Democratic Presidential ticket (President and Vice President), and will any Democratic Presidential candidate have the needed 2,025 delegate votes needed for nomination by August 1.
Other markets offered by Inkling include which teams will win Major League Baseball's American League East, American League Central, and the World Series, and who will win the United States Senate race in Minnesota this year. In the latter race, comedian Al Franken continues to be favored to win over incumbent Senator Norm Coleman. Franken has risen to $36.69 per share, while Coleman is at $20.45 per share.