“In the short run, the market is a voting machine, but in the long run it is a weighing machine,” Benjamin Graham, the guru of value investing, once wrote about the stock market.
His words seem to apply as well to prediction markets like Intrade, which set probabilities on the actual voting in presidential elections.
In a wild week like the last one, Intrade was sometimes a voting machine, issuing fluctuating probabilities on the latest events. And if it worked as designed, it was also a weighing machine, revealing the market’s combined wisdom about the candidates’ chances. [cont.]
Jeff Sommer, New York Times