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Who is going to become president in 2008? Will it be Clinton, Obama, Giuliani or Internet sensation Ron Paul? I don't know, but if I had to make 2008 presidential election prediction, I would first look at polls or better yet a prediction market. Most of you are probably familiar with how political polls work. Basically, pollsters go out and ask a random sample of people who they intend to support in any given election. Then they find out what percentage of people support which candidate. This is how most newspapers and cable news networks come up with their 2008 presidential election predictions. Generally speaking, most polls about presidential and congressional elections tend to be pretty accurate usually plus or minus a few percentage points. However, there is a way that is an even more interesting, and for some people a more profitable, way to predict the outcome of the 2008 election. This is through a prediction market. The prediction market for the 2008 presidential election works a little like the stock market. You can either buy or sell a given candidate and the price is determined by what expectations all other participants think will happen. Thus, if you think a given candidate is going to win you would 'buy them' and if you think they will lose you will 'sell them.' The price of a candidate also reflects the chances are that they are going to win. For example if Hillary Clinton is currently priced at 40.0, it means that there is a 40% traders on a given prediction market think she will win the 2008 presidential election. If you think she will win you could buy her at 40.0 and then when she does win the price will go up to 100.0. Thus you would make a 60.0 profit for every prediction contract you bought. If on the other hand, you think she will lose you could sell her at 40.0 and when she loses you won't have to pay anything because her contract value will fall to 0.0. However, if she won you would then have to pay the difference between the price you sold her at and 100.0. Thus, there is some risk involved and this is where the power of the prediction market for the 2008 presidential election lies. Since, real money is involved in a prediction market most people tend to take on positions they really believe in. When you get many people doing this you get a result that very closely mirrors what the actual outcome of the election will be at any given time. So how does this help you with your 2008 presidential election prediction? Well you can do one of two things. You can either visit a prediction market site and see who is currently leading. On the other hand, if you are somebody who always says something along the lines of 'I knew that was going to happen,' then why not put your money where your mouth is. If you think you know the outcome better than the market prove it and join a prediction market yourself. |