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Failed attempts to manipulate InTrade...

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Failed attempts to manipulate InTrade...

Postby kurt_w » Tue Oct 23, 2012 11:49 am

This morning, some anonymous person apparently attempted to inflate Romney's stock on InTrade. They apparently spent about $18,000 in a matter of minutes, and temporarily boosted Romney's numbers from about 40% to about 48%.

Mostly, that's a way to lose money fast. When people realized what was happening, investors swooped in and bought up the other side of the bets, driving Romney back down nearly to where he had been before the intervention started:

Image

The same thing happened in 2008 -- someone suddenly poured money into InTrade's betting market to boost John McCain's numbers. That one, too, didn't last very long.

Which raises the interesting question of why try to manipulate InTrade this way if it means spending lots of money for only a very transient effect?

But I suppose when a candidate has enough super-wealthy donors spending money on their behalf, somebody's going to decide that it's worth losing a few thousand dollars for the chance of possibly swaying the media narrative about the race.

The smarter way to do this would be for Mr Romney-Loving Rich Guy to just quietly spend $700 or $800 a day buying up Romney shares on InTrade, day in and day out for a few weeks. That would be harder to detect, and more likely to last, as various positive feedbacks would have time to kick in.
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Re: Failed attempts to manipulate InTrade...

Postby Meade » Tue Oct 23, 2012 9:01 pm

We checked this out for potential manipulation - it certainly fit the pattern at first glance.

However, during the period you reference above 40 individuals bought Romney shares and no individual bought more than 15% of the shares traded during that period. A look at those 40 accounts shows nothing suspicious.

So we don't believe this was manipulation but more a run on Romney when the market was unusually thin.

Carl Wolfenden
Exchange Operations Manager
Intrade - The Prediction Market
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Re: Failed attempts to manipulate InTrade...

Postby kurt_w » Wed Oct 24, 2012 7:26 pm

The mysterious Intrade Romney Bubble of 23 October 2012 seems to have come and gone. Obama's numbers dropped and then bounced back again, by about ten percentage points, on a day when there was no particular campaign-related news except for a strong debate performance by Obama the previous night (plus of course the Trump fiasco).

Nate Silver discusses the virtues and vices of InTrade and other prediction markets here.
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Re: Failed attempts to manipulate InTrade...

Postby Radical Cheerleader » Wed Oct 24, 2012 7:53 pm

Meade: do you know what the extent of Intrade's "investigation" was? "Did you try and manipulate the Romeny market? No? Okay, we believe you!" Manipulation will happen there whenever there's the opportunity and that Intrade will tacitly allow it. It doesn't really matter, though, because smart investors always buy the other side up when they see things are out of whack, so it eventually evens itself out.
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Re: Failed attempts to manipulate InTrade...

Postby Detritus » Wed Oct 24, 2012 8:02 pm

If there were no attempts a manipulation, then it would not be a market. Unmanipulated markets only exist in freshman econ textbooks, and the propaganda of the market-manipulating class.
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Re: Failed attempts to manipulate InTrade...

Postby kurt_w » Wed Oct 24, 2012 8:23 pm

Well, what we're talking about here is a bit different, though, since the objective isn't to make money off the market.
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Re: Failed attempts to manipulate InTrade...

Postby snoqueen » Thu Oct 25, 2012 12:18 am

A lot depends on the intent of the participants in these situations.

With people who study polls and try to aggregate them in a rationally-designed model, one purpose is to arrive at results that, toward election day, begin to converge on the actual election results. The highest success would be calling the election exactly as it comes out.

With people who make Intrade bets (or similar), the purpose can be anything they please. Speculation, moving the numbers, and affecting other participants' behavior are all possible purposes. None of those has anything to do with calling the election on election day or close to it.

Following the fluctuations of these various indicators also has different purposes. Some are trying to divine the outcome, some are watching the effect of current events on various races, and some have other things in mind including manipulation of the reactions of onlookers.

Of course neurotically following polls and markets attempting to divine trends plays in conveniently to that manipulation.
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Re: Failed attempts to manipulate InTrade...

Postby Crockett » Thu Oct 25, 2012 9:59 am

kurt_w wrote:Well, what we're talking about here is a bit different, though, since the objective isn't to make money off the market.


Sounds a lot like Wall St the past decade...
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