This is only a Preview!

You must Publish this diary to make this visible to the public,
or click 'Edit Diary' to make further changes first.

Posting a Diary Entry

Daily Kos welcomes blog articles from readers, known as diaries. The Intro section to a diary should be about three paragraphs long, and is required. The body section is optional, as is the poll, which can have 1 to 15 choices. Descriptive tags are also required to help others find your diary by subject; please don't use "cute" tags.

When you're ready, scroll down below the tags and click Save & Preview. You can edit your diary after it's published by clicking Edit Diary. Polls cannot be edited once they are published.

If this is your first time creating a Diary since the Ajax upgrade, before you enter any text below, please press Ctrl-F5 and then hold down the Shift Key and press your browser's Reload button to refresh its cache with the new script files.


  1. One diary daily maximum.
  2. Substantive diaries only. If you don't have at least three solid, original paragraphs, you should probably post a comment in an Open Thread.
  3. No repetitive diaries. Take a moment to ensure your topic hasn't been blogged (you can search for Stories and Diaries that already cover this topic), though fresh original analysis is always welcome.
  4. Use the "Body" textbox if your diary entry is longer than three paragraphs.
  5. Any images in your posts must be hosted by an approved image hosting service (one of: imageshack.us, photobucket.com, flickr.com, smugmug.com, allyoucanupload.com, picturetrail.com, mac.com, webshots.com, editgrid.com).
  6. Copying and pasting entire copyrighted works is prohibited. If you do quote something, keep it brief, always provide a link to the original source, and use the <blockquote> tags to clearly identify the quoted material. Violating this rule is grounds for immediate banning.
  7. Be civil. Do not "call out" other users by name in diary titles. Do not use profanity in diary titles. Don't write diaries whose main purpose is to deliberately inflame.
For the complete list of DailyKos diary guidelines, please click here.

Please begin with an informative title:

I saw an interesting article on Slate today: "Why a Single Trader Was Willing to Lose Millions Betting on a Romney Win"  It seems that one third of the bets placed on a Romney win in the last few weeks were by one person.  The article relies on this paper, titled Trading Strategies and Market Microstructure: Evidence from a Prediction Market.

The paper from Columbia University's Rajiv Sethi and Microsoft Research's David Rothschild found that the single anonymous trader accounted for about one-third of all bets made on Romney during the final two weeks of the campaign. So, regardless of motivation, it's clear the trader played an out-sized role in determining an Intrade line that was all too often used by pundits and political journalists to suggest the presidential race remained a toss-up until the very end.
Why'd he do it?
Here's the three possible reasons the authors examined before largely settling on the one that makes the most sense in the world of politics:
(i) the trader was convinced that Romney was underpriced throughout the period and was expressing a price view, (ii) he was hedging an exposure held elsewhere, or (iii) he was attempting to distort prices in the market for some purpose.
"Why a Single Trader Was Willing to Lose Millions Betting on a Romney Win"

After analyzing the possibilities, the authors come to the conclusion that he was attempting to distort prices in the market for some purpose:

Assuming the trader was rational and informed, Option 1 can most likely be ruled out because the trader could have bought pro-Romney positions for cheaper on Betfair, another exchange similar to Intrade (although one the authors admit comes with some added headaches for U.S. traders). So, too, is Option 2 unlikely given how the market reacted at other key points during the election, like during the first debate and on Election Day.

That leaves Option 3 as the most likely explanation for the heavy pro-Romney trading. "This was someone who was extremely sophisticated," Sethi, who also teaches at Barnard College, told the Wall Street Journal. "It was not someone who was dumb or stupid."

"Why a Single Trader Was Willing to Lose Millions Betting on a Romney Win"

Was it worth it?   Maybe.

Sethi and Rothschild note, the millions may have actually been money well spent when you consider that their research shows that "a highly visible market that drove many a media narrative could be manipulated at a cost less than that of a primetime television commercial."
"Why a Single Trader Was Willing to Lose Millions Betting on a Romney Win"

Just shows that markets by their nature get rigged.  Intrade showed nothing but the ability of the wealthy to manipulate the market.  

Nate Silver, however, was not bought and he got it right.

Barack Obama easily won re-election.  


You must enter an Intro for your Diary Entry between 300 and 1150 characters long (that's approximately 50-175 words without any html or formatting markup).

Extended (Optional)

Your Email has been sent.