Dividents replied by jongraft @ Tue, 11 Nov 2008 00:36:52 -0000

jongraft — Tue, 11 Nov 2008 00:36:52 -0000

I especially like the idea of dividends in very long-term calendar markets, such as the market on when a human will land on the moon again. It is never more than a year away, eventhough almost every participant is aware there are no plans to return until 2020 at the earliest. Also, the per share price is around 500 inkles, scaring away new players. At regular intervals – even annually – the price could be reduced an amount that is paid out to those holding shares. This would keep the market fresh and yield better predictions. We are NOT going to be on the moon in January, 2010, sorry.

Dividents replied by mpa5220 @ Fri, 25 Jan 2008 01:58:21 -0000

mpa5220 — Fri, 25 Jan 2008 01:58:21 -0000

The suggestion for adding dividends for long term markets would have the effect of creating an investment incentive in the long term markets to compensate for Inkflation. Instead it seems the focus should be on stopping Inkflation.

Dividents replied by wstritt @ Wed, 24 Oct 2007 22:55:21 -0000

wstritt — Wed, 24 Oct 2007 22:55:21 -0000

My thought on the moderator really was more focused on trying to ensure that the market was set up such that trading was suspended before the results were known. In other words, for individual games, ensure the market is set up to automatically close before the known start of the game. The formula 1 market, for example, was set up that way – trading closed shortly before the event started. Some markets with multiple outcomes would be more difficult to do that with. Still trading on college football, for example, could be suspended every Saturday until results are known. Having not run a market, I don’t know if that is even possible…but it is a thought. Making it easier for the moderator to be able to figure those things out would be helpful as well.

With respect to the margin comment, my thought in your example would be rather than having to reserve 350 inkles, you could meet that requirement by having maybe at least 700 inkles in “value” of other stocks in your account allowing you to put that 350 to work elsewhere. Set it up with automatic margin calls/liquidation of positions should the excess value fall which is the risk shorts or any margin player takes anyway.

In my Argentina example, the stock should be at 0 but is ~8 at the moment. However, to get at those 8 inkles, one has to completely tie up 92 which will probably happen the day the stock closes (or if a millionaire choses to impose discipline) but, for the reasons noted above, probably not before then. I might be able to personally drive it to 0 if the “value” of my other investments were considered but I’m not interested in tying up more inkles until the market closes on Monday when I can make inkles in the meantime in other markets.

You may be right about the wisdom of handing out more at the start but without enough liquidity it is tough to stimulate more active trading. I do like your limits by the way, but unless there are more traders and/or activity, the markets will tend to remain inefficient (though the inefficiency in itself may encourage more trading with just some of your suggested limits).

Dividents replied by ednique @ Wed, 24 Oct 2007 08:14:59 -0000

ednique — Wed, 24 Oct 2007 08:14:59 -0000

Even though my thoughts were written with being a marketplace manager of my own in mind, I agree on the problems you arise concerning the inklingmarkets market place.

Indeed at inklingmarkets, closing a market is a huge problem but the moderator can’t possibly know all events happening around the world.
Therefore I suggest to force a market owner to add a URL of reference when creating a market. As such the moderator can go to that URL and verify closing and possible stocks.
Next I would suggest to add an extra page to the wizard to create markets that is specially dedicated to closing the market. Asking the market owner several dates for closing the market upfront will have a smoother experience for traders. Several dates are required for markets like tournaments where stocks are closed at $0 when a team loses a game.
I also suggested somewhere here on the forums to add timezones to the system so that market owners do not have to calculate their time agains the time of the site.

Payout is another problem that needs to be dealt with. If a trader has won, he doesn’t like to wait for weeks to be payed out…

We have to make the trading experience as good as possible so that more traders stick around and keep trading…

The initial amount of inklings is indeed a problem… After a couple of minutes all my money was invested on only a few stocks. I even didn’t know yet that I have to carefully look at the closing date so my money isn’t blocked for a too long time… As such I had no more money to spend and I had to wait a long time for results… This will force a trader to leave the marketplace and “forget” to come back…
The first 2 of my suggested investment limits could have solved my problem as I would have been investing less money on a single stock and market, leaving me money to invest some more.
I do not believe that giving more money is the answer because that will result in some more investing whithout thinking and experience when I start.

The “going short” solution you give won’t change a thing. If you go short on a stock that is worth $30 and you sell 5. $150 will be deposited in cash and $500 reserved which is the same as reserving $350 like you suggest…

Dividents replied by wstritt @ Wed, 24 Oct 2007 03:01:55 -0000

wstritt — Wed, 24 Oct 2007 03:01:55 -0000

The basic problem is a combination of 1) there are not enough traders and not enough depth in the markets to make them truly efficient and 2) given how some of the markets are run (e.g. not closed until the result is known) there is too much “free money” available in the short run to make participating in longer markets attractive almost irrespective of the “interest rate” one might pay.

I’ve not been though most of the markets but there is at least one I am participating in that is essentially a lock to more than double in price within the next 6 months however the payout is at least that far away. With the ability to more than double ones money over a weekend by doing football or baseball games in the 4th quarter, 9th inning or even after the game, given limited inkles to invest, what is the point of investing in a longer market? Coupled with the large tie up of inkles if you want to short makes it even harder to play long term markets if you think the positve answer is wrong.

Heck, there is a market asking whether the current President of Argentina will be re-elected. The guy isn’t even a candidate, and hasn’t been one for months. I suppose he could encourage a massive write-in campaign that might turn the tide, but his wife, who is the leading candidate and his presumptive political heir, would probably be pissed. An efficient market would have pounded that baby down to ZERO months ago. Admittedly the question was posed in Spanish but anyone that found this site can probably find babelfish and any search on the name would tell you the answer to the question posed. I’d drive it to close to zero (I’ve contributed to its decline) if I had unlimited resources but I don’t have the inkles to do it. I’d rather go with the quick pops.

Which leads to a couple of suggestions:

- go with investment limits suggested by ednique which would at least stop the concentration of resources in short term “sure things”
- have the moderator ensure that markets are set up to halt trading before sporting events begin, before election day, when the stock price is within 5% of target – in general before the outcome is reasonably certain. (Some market makers do a nice job of this in market design – some don’t close out markets until days ater the result is known).
- combine the above with giving people more inkles to begin with to stimulate more active trading.
- change the short rules to some kind of margin requirement rather than “inkle reserve” difference between 100 and the price.

All of these things might encourage more participation in longer term markets, while the last three should tend to make the markets actually more “predictive” rather than a game of who has the fastest internet connection to sell 50 shares of “LSU goes undefeated” in the final seconds of the game.

Dividents replied by ednique @ Tue, 09 Oct 2007 11:41:47 -0000

ednique — Tue, 09 Oct 2007 11:41:47 -0000

Very good remark onemike…
If P1 closes this week and cashes out $100 and P2 pays a dividend of $5 this week and closes next week cashing out $100, I think a trader would buy P1 this week and a similar as P1 next week…

Concerning the predictive value of the market I fear dividends will influence the market in a bad way.
If a stock is at $25 and a dividend of $5 is paid, the stock goes down $5 to $20. If there are other stocks in that same market that do not get a dividend, their value will increase. As such the market gets flattened out after dividend.
Offcourse, people can trade again, but the results as before the dividend isn’t there anymore…

The only thing that is left in order to increase trading in long term markets, is setting more rules on how traders can invest their money.

set limits on money invested in a single stock as a % of their assets.
set limits on money invested in a single market as a % of their assets.
set limits on money invested in 1-week-markets as a % of their assets.
set limits on money invested in 2-week-markets as a % of their assets.
set limits on money invested in 3-week-markets as a % of their assets.
They could still avoid long term contracts and keep more savings…

Dividents replied by onemike @ Tue, 09 Oct 2007 02:02:10 -0000

onemike — Tue, 09 Oct 2007 02:02:10 -0000

Dividends or ‘interest payments’ of some sort would encourage participation in longer term markets.

I wonder what discount rate or inflation rate would be appropriate if interest were to be paid on account balances. If some sort of return was paid for holding a long position in a contract, would a short position similarly be paid a return or would the short position be charged?

I’m not sure about the economic issues and how they work out.

Some basic analysis might go: assume a trader has a balanced position in two contracts (balanced meaning trader’s prediction = existing market price for both contracts P1 and P2) one which expires in one week and the other which expires in two weeks, next, assume new information about the later contract such that the trader now expects the price to become P2+X. How big does X have to be to induce a trader to sell contract 1 to fund additional purchases of contract two? I.e. how much return next week will a trader give up to get a larger return in two weeks?

In principle it seems possible to set up such pairs of markets and then infer the amount X from trader behavior.

Knowing this amount doesn’t answer the question of whether it would be helpful to pay dividends or interest on longer term markets, but it would be one thing you would want to know.

Dividents replied by ednique @ Mon, 08 Oct 2007 11:48:05 -0000

ednique — Mon, 08 Oct 2007 11:48:05 -0000

It seems that short term markets have very active trading but the long term markets (almost) nothing…
As such I think that paying out dividents could help increase trading in those markets.

If one would receive for ex $5 each week, he will probably trade in a market that lasts a year. If not, his money will be blocked during a whole year and he won’t trade in that market…

How this would work, I don’t know, but I thought that you could allow the market owner to pay divident to a single or all stocks in a market.

If you have a market about a championship, you could award each team that wins a game $5 divident. Or if you are guessing a date, $5 each week the event has not been taking place.

As in normal stock markets, when paying dividents, the stock price is lowered accordingly.
Once again other traders could as such see new opportunities in a stock after devident.

As I’m not a specialist on the subject I have no clue what paying dividents mean in prediction markets in terms of their predictive corectness…

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