Bet2Give vs Boeing - Part 2

[Emile Servan-Schreiber]

Perhaps you'll remember that a couple weeks ago Bet2Give started featuring a stock about whether or not Boeing would meet its May 2008  delivery target for the new 787 aircraft. Yesterday, The company announced that despite its recent vows to meet the deadline, it was delaying delivery by at least 6 months! From the start, the Bet2Give stock has been trading way below 50%, mostly between 20-30%... Obviously, traders did not take the company at its word. See: https://bet2give.com/b2g/market/linear/market.html?symbol=Boeing787onTime

The funny thing is that Wall Street acted all surprised at Boeing's announcement. Boeing's stock fell 2.73%. Here's a funny quote from a NYT article: "Analysts said the postponement of 787 deliveries was surprising, given Boeing's insistence as recently as September that despite the test flight delays, it would be able to meet a May 2008 delivery target.".

If analysts are really so gullible that they'll habitually take a company's word for it, that presents a huge opportunity for prediction markets.

--Emile
NewsFutures
http://www.bet2give.com

[Lucy Vega]

Emile,

What was the USD total of all bet2give trades on this claim?

In the absence of liquidity, does price mean anything?

I also wonder whether the persons (person?) betting against were also short the stock, where they could have made real money.

Lucy

[Emile Servan-Schreiber]

Hi Lucy

There were 10 traders who completed 20 trades over a two-weeks period. The average trade was $1.17, the total was $23.57. Over the two-weeks period, the volume-weighted average price for the stock was $0.26 (ie, 26%). The traders included several Boeing employees and journalists and bloggers specializing in the aerospace industry and Boeing in particular. Although the dollar amounts are tiny, there hardly was an "absence of liquidity" as you suggest, and the price remained relatively stable throughout the period (ie, no wild seesaw oscillations). So, yes, the price meant "something", namely that it was significantly more likely that Boeing would not deliver on time. In general with prediction markets, where little or often no money is involved (as opposed to stock markets), it is a fallacy to equate the number of traders with the accuracy of a price/prediction. The meaning of a market price is rather more related to the quality of the traders (how much they know or care about the issue) than to their quantity.

--Emile
http://www.bet2give.com

--
Emile Servan-Schreiber
CEO, NewsFutures Inc.
http://www.newsfutures.com
Tel US: +1 (443) 321-2700
Tel EU: +336 1804 3404
Fax: +1 (978) 383-1065
Email: ej...@newsfutures.com

*** THIS DOCUMENT CONTAINS CONFIDENTIAL PROPRIETARY INFORMATION OF NEWSFUTURES, INC. ***

[Lucy Vega]

Well golly, thanks for the education. Next I'll learn that size doesn't matter either. :)

I imagine your confidence in the wisdom of your crowd lead you to short BA like crazy above 100, and I congratulate you on your windfall.

A handful of people collectively risked the cost of a meal at Chili's (in semi-real money) and you're bragging that your "market" was sharper than NYSE? Puhleeze. To take such a public stand on barely an anecdote is to invite ridicule.

I think your bet2give idea is very clever marketing for NewsFutures, but perhaps it would be prudent to allow it to escape infancy before asserting that it can speak.

[Robin Hanson]

It is fine to complain that this is only one case, and we'd want many more cases before we concluded much about accuracy.  But Emile is right that the amount of money at stake isn't very relevant - the question is what info was behind that money. 

At 09:16 AM 10/18/2007, Lucy Vega wrote:

Well golly, thanks for the education. Next I'll learn that size doesn't matter either. :)

I imagine your confidence in the wisdom of your crowd lead you to short BA like crazy above 100, and I congratulate you on your windfall.

A handful of people collectively risked the cost of a meal at Chili's (in semi-real money) and you're bragging that your "market" was sharper than NYSE? Puhleeze. To take such a public stand on barely an anecdote is to invite ridicule.

I think your bet2give idea is very clever marketing for NewsFutures, but perhaps it would be prudent to allow it to escape infancy before asserting that it can speak.

On 10/18/07, Emile Servan-Schreiber <ej...@newsfutures.com> wrote:

Hi Lucy

There were 10 traders who completed 20 trades over a two-weeks period. The average trade was $1.17, the total was $23.57. Over the two-weeks period, the volume-weighted average price for the stock was $0.26 (ie, 26%). The traders included several Boeing employees and journalists and bloggers specializing in the aerospace industry and Boeing in particular. Although the dollar amounts are tiny, there hardly was an "absence of liquidity" as you suggest, and the price remained relatively stable throughout the period (ie, no wild seesaw oscillations). So, yes, the price meant "something", namely that it was significantly more likely that Boeing would not deliver on time. In general with prediction markets, where little or often no money is involved (as opposed to stock markets), it is a fallacy to equate the number of traders with the accuracy of a price/prediction. The meaning of a market price is rather more related to the quality of the traders (how much they know or care about the issue) than to their quantity.

Robin Hanson  rha...@gmu.edu  http://hanson.gmu.edu
Research Associate, Future of Humanity Institute at Oxford University
Associate Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326  FAX: 703-993-2323
 

[Peter C. McCluskey]

vega...@gmail.com (Lucy Vega) writes:
>A handful of people collectively risked the cost of a meal at Chili's (in
>semi-real money) and you're bragging that your "market" was sharper than
>NYSE? Puhleeze. To take such a public stand on barely an anecdote is to
>invite ridicule.

A simpler reason for doubting his claim is that there is no obvious way
to determine from the NYSE reaction whether the NYSE was expecting on time
delivery or a delay of several months. All I can see is that the NYSE was
expecting a delay of less than 6 months.
--
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Peter McCluskey | The road to hell is paved with overconfidence
www.bayesianinvestor.com| in your good intentions. - Stuart Armstrong

[Emile Servan-Schreiber]

Despite the odds that this post will subject me again to whithering sarcasm from Lucy Vega, allow me to offer a quick update on the Boeing vs Bet2Give story: Just before the company's announcement yesterday that delivery of the 787 would be delayed yet again, this time pushing it into 2009, the consensus prediction on Bet2Give that the plane would be delivered in 2008 was just 55% (that's the volume-weighted average price from mid-December, when the stock was listed, to just before the announcement yesterday). This time, Boeing's stock fell 5%.

As the 787 saga is proving to be fertile ground for interesting bets, even in the short term, we've now listed a new stock on Boeing's prediction that the first test-flight will happen before the end of Q2. Join the fun!

Cheers,

--Emile
http://www.bet2give.com