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Old 08-04-2015, 05:35 PM   #1
Barkeep49
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Join Date: Jan 2001
Location: Not too far away
Prediction Market Inefficiency (or ping: Quicksand)

So the market over at PredictIt for the Republican nomination for President is widely inefficient. Since there can only be 1 GOP nominee for President, in theory the chances of all the candidates should add up to about 100% (that is the Buy Yes). At the moment it's 269%.

So the good news is that you can also short sell (Buy No). Clearly you want to short sell all of the candidates as you will make more money from collecting on all your Nos that come true than on the 1 that doesn't. However, you are limited to $850 in the market. Ignoring how fees impact the decision, what is the profit maximizing route?

Hope I've explained it OK. I'm already invested money, but am very unsure that I did it the right way and thought that this might be a good place to discuss the right approach.


Last edited by Barkeep49 : 08-04-2015 at 05:35 PM.
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