An Empirical Study of Dynamic Parimutuel

Transcription

An Empirical Study of
Dynamic Parimutuel
Markets:
Evidence from the
Tech Buzz Game
David Pennock, Yahoo!
Yiling Chen, Harvard (work done @ Yahoo!)
Tej Kasturi, Yahoo!
Mike Dooley, Rael Dornfest, Gary Flake, Havi Hoffman,
Bernard Mangold
Presented at WebKDD 2008, Las Vegas
Outline
1. What is a prediction market?
2. What is a dynamic parimutuel
market?
3. What is the Tech Buzz Game?
4. Empirical analysis of TBG
5. Conclusion
Chen, Pennock, Kasturi - WebKDD 2008
Research
Ask The Crowd
• Choose what you’d like to predict:
Bird Flu Outbreak US 2008?
(Y/N)
• Let people bet on it
i.e., Buy or sell share of
I am entitled to:
$1 if
Bird Flu
US ’08
$0 if
Bird Flu
US ’08
Research
http://intrade.com
Research
The Wisdom of Crowds
Backed in dollars
• What you can say/learn
% chance that
•
•
•
•
•
•
•
•
Hillary wins
GOP wins Texas
YHOO stock > 30
Duke wins tourney
Oil prices fall
Heat index rises
Hurricane hits Florida
Rains at place/time
• Where
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IEM, Intrade.com
Intrade.com
Stock options market
Las Vegas, Betfair
Futures market
Weather derivatives
Insurance company
Weatherbill.com
Research
With Money
Without
Research
The Widsom of Crowds
Backed in “Points”
•
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HSX.com
Newsfutures.com
InklingMarkets.com
Foresight Exchange
CasualObserver.net
FTPredict.com
Yahoo!/O’Reilly Tech Buzz
ProTrade.com
StorageMarkets.com
TheSimExchange.com
TheWSX.com
•
Alexadex, Celebdaq, Cenimar, BetBubble, Betocracy, CrowdIQ,
MediaMammon,Owise, PublicGyan, RIMDEX, Smarkets, Trendio,
TwoCrowds
•
http://www.chrisfmasse.com/3/3/markets/#Play-Money_Prediction_Markets
Research
With Money
Without
IEM: 237 Candidates
HSX: 489 Movies
actual
100
50
20
10
5
2
1
1
2
5
10
20
50
100
estimate
Parimutuel market
1
1
1
1
1
1
1
1
1
1
1
1
Dynamic parimutuel market
C(1,2)=2.2
C(2,3)=3.6
C(2,2)=2.8
C(3,8)=8.5
C(4,8)=8.9
C(5,8)=9.4
.82
.78
.5
9
.3
.4
C(2,4)=4.5
.87
.91
.49
C(2,5)=5.4
.94
C(2,6)=6.3
6
.9
0.97
C(2,8)=8.2
C(2,7)=7.3
Dynamic parimutuel market
C(1,2)=2.2
C(2,3)=3.6
C(2,2)=2.8
C(3,8)=8.5
C(4,8)=8.9
C(5,8)=9.4
.82
.78
.5
9
Share-ratio
cost function:
.C(q
.87
3 1,q2)=√q12+q22
.4Properties
.91
.49
•No arbitrage
•pricei/pricej = qi/qj
.94
•pricei < $1
•payoff if right = C/qo >6 $1
C(2,4)=4.5
C(2,5)=5.4
C(2,6)=6.3
.9
0.97
C(2,8)=8.2
C(2,7)=7.3
http://buzz.research.yahoo.com
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Yahoo!,O’Reilly launched Buzz Game 3/05 @ETech
Research testbed for investigating search futures
Buy “stock” in hundreds of technologies
•
Earn dividends based on actual search “buzz”
•
•
API interface
Exchange mechanism is new Yahoo!R invention
Cross btw stock market and horse race betting
http://buzz.research.yahoo.com
DPM Strategies
• DPM is a zero-sum wagering game
Invented in 2004; Never used until TBG
• Myopic-best strategy known: Act as is
current trade is the final trade
• Myopic-best is not an equilibrium
“Correct” equilibrium strategy is unknown
• Partial motivation: What are real strategies
“in the wild”? Do “smarter” traders do better?
Does the mechanism “work”, i.e. aggregate
information?
Level 0 Test
Level 1 Test
Aside: Crime Pays
Level 2 Test: Accuracy #1
• Average forecast error
across 352 stocks
forecast error
rapidly declines
as traders zero in
on correct
predictions
end of phase 1
contest period
What’s Next?
• Formal/theoretical characterization of
DPM equilibrium play
• Better partitioning of trader strategies
• Compare against smarter robots
• DPM with real money!
Research
New Prediction Game: Yoopick
Sharad Goel
David Pennock
Daniel Reeves
Prasenjit Sarkar
Cong Yu
Research

An Empirical Study of Dynamic Parimutuel

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