Intrade Market likely manipulated to portray Romney having a Chance

[cthulu2016]

This is in LBN, but LBN requires using the real headline ("One Big Trader Lost Millions Betting on Romney, Study Finds" Zzzzzz) which side-steps the most interesting aspect of the story... okay, the fun part, which is the big Romney bettor's motivation. Maybe he (or she) believed the "unskewed polls" thing and had no outlet for his conviction other than intrade, or maybe the Romney price was being propped up.

http://www.democraticunderground.com/1014601642

I remember thinking at the time that Intrade was practically giving money away to Obama bettors. Which they were. (This guy's money.) Such markets are "thin" and prone to manipulation by somebody with millions to throw away. But that manipulation isn't really worth the price. This bettor would have been better served to spend his $5-$7 million on a PAC with ads in a couple of close states.

The speculation that he might have been hedging some other investment is potentially funny. Perhaps he was shorting catfood stocks and hedging with Romney bets.

A new academic paper digging into presidential betting in the final weeks of the 2012 election finds that a single trader lost between $4 million and $7 million placing a flurry of Intrade bets on Mitt Romney—perhaps to make the Republican nominee’s chance of victory appear brighter.

Two economists who studied the data offer various rationales for the trader’s aggressive wagering on Mr. Romney in the final two weeks of the campaign. The anonymous trader placed 1.2 million pro-Romney contracts, some of which were actually in the form of bets against a Barack Obama victory.

The most plausible reason for the betting, the authors conclude, is that “this trader could have been attempting to manipulate beliefs about the odds of victory in an attempt to boost fundraising, campaign morale, and turnout.”

The economists, Rajiv Sethi, of Barnard College and Columbia University, and David Rothschild, of Microsoft Research, also analyze the possibility that the trader, who accounted for a third of all the money wagered on Mr. Romney in the last two weeks, could have placed his bets either to hedge on wagers in other markets or simply because he thought the price was good.

http://blogs.wsj.com/washwire/2013/09/23/one-big-trader-lost-millions-betting-on-romney-study-finds/

[jmowreader]

1. Tax Hedging is my best guess

The IRS allows you to deduct gambling losses to the extent of gambling winnings. Yes, there are people who so despise taxes they will piss away $10 to keep from paying 10 ¢ in tax.