[extropy-chat] Futures markets volatility

[stencil]

In extropy-chat Digest, Vol 14, Issue 4
>------------------------------
 Robin Hanson and Brett Paatsch:

>>  But this does at least raise
>> a small suspicion that theses markets were too volatile due to 
>> over-confidence.
>
>I don't follow. I don't get how you are thinking of "over-confidence".
>If you are speaking with your economists hat on could you please
>elaborate a bit. 
>
>I'd have thought that efficient markets would be indifferent to
>"over-confidence". 
>
>How could "over-confidence" have produced too much volatility?
>
>
>> However, one case won't really show this - we have to look at
>> statistics over many events to see if there's a trend.
>> 
>>

Minuscule as it may be, the population that participates in futures markets is
far from homogeneous.  Stategy Pages's market
http://www.strategypage.com/prediction_market/default.asp
(before they yanked the Bush/Kerry lines last night) showed a consistent
expectation that Kerry would lose and that Bush would win.  My late neighbor
lady, two doors down the hill,  eponymous first victim of the Kael Syndrome,
surely was not the last.  (To her credit, some feel she may have speaking
ironically of her own, revealed, provincialism.)  
While we could wish that markets operate in a fluid medium of information,
there is still a great deal of viscosity and turbulence.  Hopefully, this
season's major harvest will be the spreading realization that the prophet is
not the deity and that CBS in fact means "Can't Believe."

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