As Mitt Romney announced his running-mate, we are having a bit of fun with Intrade.
For those who are not familiar, Intrade is a online prediction market. The underlying events have only two possible outcomes: yes or no (e.g. either President Obama gets re-elected, or he does not), and the pay-off for the contract is either all or nothing. For any given event, the higher the price of the contract, the higher the probability of that event eventually happening (according to the collective judgement of market, if you like).
As Intrade is rather known for its prediction markets for political events, we look at a few related contracts for the presidential election.
First, as Paul Ryan was announced to be the running-mate of Mitt Romney, the contract for predicting Paul Ryan’s nomination shot through the roof. Meanwhile, another potential running-mate, Marco Rubio, has his contract on Intrade fell off a not-so-high cliff immediately because his chance of becoming a VP candidate has dropped to zero (obviously).
Next, the chance of Obama getting re-elected. Interestingly (although not surprisingly), the probability of Obama getting re-elected (according to Intrade) tracks pretty well with US equities. The chart below shows the contract price of Obama winning the election and S&P 500.
Photo: InTrade, Fred
Meanwhile, for Mitt Romney… well we are not sure what to make of it.
Photo: Intrade, Fred
For more news and analysis, visit Also sprach Analyst.
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