It's Like Royal Dutch Shell
So I don't understand why arbitrageurs haven't closed the gap between futures on the Intrade and Iowa election markets. At the time of writing, Senator Clinton is trading at about 43 cents on Intrade and about 46 cents on the Iowa markets. Why can't someone just sell on Iowa and buy on Intrade? You could make a quick 3 cents on the dollar while taking no net position on the underlying bets. Both markets are real-money markets, and I can't discern any difference between the bets.
[UPDATE: I think there's an 8 cent gap on Obama getting the nomination. Anyway, these numbers are just illustrative - the real question is why any (significant) gap exists for any candidate.]
[UPDATE: I think there's an 8 cent gap on Obama getting the nomination. Anyway, these numbers are just illustrative - the real question is why any (significant) gap exists for any candidate.]
posted by James | 2:30 PM
2 Comments:
Transaction costs? Maybe the bets on one or the other markets don't resolve fast relative to price fluctuations (I guess it would have to be true for both markets). Maybe the prices are reported for different times. It is curious. I don't really want to wade through the rules to see if there are obvious answers.
If you're so sure there's an arbitrage opportunity, put your money where your mouth is and make the trade.
Reminds me of the joke involving two economists who're walking down the road, and one sees a $100 bill lying on the ground. You know the punchline.
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