2013 UBC Prediction Market for BC election

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theleftyinvestor
2013 UBC Prediction Market for BC election

I have created this topic as one central thread to discuss the behaviour of the UBC Prediction Market for the 2013 BC election.

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theleftyinvestor

The discrepancy of Conservative popular vote shares has been noted now on this forum as well as by the author of the 308 blog, BC Iconoclast and a number of other tweeters. It keeps flicking up to a price of about 20 cents even though the polls are consistently showing around 10%.

Myself I have decided to invest in the market primarly by betting against this price. I purchased a number of unit shares with my own money, and then sold the Conservative component.

I am now seeing that there are some traders who strongly believe the CON vote shares are worth less than 13 cents, and another individual or group who believe it's worth closer to 20 cents.

Whenever the bids appear at 20 or so cents, I sell CON vote shares. Meanwhile I also bury a bid of my own down in the 13-14 cents range. Every once in a while, someone else goes on a selling spree and I buy up some of their shares at what they probably still believe to be more than the shares are worth. This constant pattern of selling shares at 20 cents and buying them back at 13-14 cents has spun off some profit.

As of this moment I have made a 10-20% profit arbitraging these groups of traders.

kropotkin1951 kropotkin1951's picture

So UBC is running a crash course in market manipulation. Seems appropriate to me and mirrors the real world where the small investor is merely a pawn of large institutional investors who have the financial clout to actually drive the prices to suit their short term profits.

theleftyinvestor

Except the market is small and illiquid enough that a person of modest means can reap the gains...

I just don't see how the trader(s) consistently bidding 20 cents on CON seat shares would be able to benefit financially from essentially giving free money to people who assign a correct value to the shares. Aside from giving the impression that CONs are doing better than they really are.

kropotkin1951 kropotkin1951's picture

The question is always what is a persons motivation.  Believe it or not short term financial gain is not always the only motivation.  Obviously trying to enhance the BC Con brand is at play and that is obviously worth a few dollars to some people.

theleftyinvestor

kropotkin1951 wrote:

The question is always what is a persons motivation.  Believe it or not short term financial gain is not always the only motivation.  Obviously trying to enhance the BC Con brand is at play and that is obviously worth a few dollars to some people.

Certainly.

It looks like now I am no longer the only arbitrageur consistently going in and trying to correct mispricing. I have some company. This suggests to me that the market is going to start to see more liquidity. After all the election has yet to be officially called.

NorthReport
theleftyinvestor

From a total investment of $200, I managed to move it up to about $234 after some arbitraging and selling back to cash, all based on the mispricing of Conservative shares.

I then embarked on some more trading that was less successful and shaved a few dollars off that, but was still sitting around $230 a few days before the election.

Anyway I did something really dumb. I bought a bunch of unit shares in the majority government market and sold the Liberal & Other parts for a total of about 10 cents on the dollar. I figured I'd make some final quick money, right? Cause everyone knew the obvious winner of the election...

Of course my NDP majority government shares are worth zero after the loss. My total cash remaining is $133 which I have just divested. Looks like I have paid $67 tuition to learn a lesson in gambling!

Next time it would be best if any final bets I make are contrary to the outcome I actually desire. That way, either I win the election or I win a consolation prize.