I bought a $25 in the UBC Election Stock Market by using my credit card. I’m not sure how they do this because I figured that the credit card companies are going to ask for 2% on top of that. Anyhow, I’ve decided to play the LISPOP strategy on the seats market.
Perhaps this isn’t such a good idea, because I haven’t done well in prediction markets in the past.
At first I short sold 15 Liberal shares, because it had the biggest difference between LISPOP and current market values. This evening I bought 20 shares of Conservative after I did some calculations that showed buying Conservative shares is a better investment. This is because short selling Liberal costs me 68.8¢ per share, while buying Conservatives is only 40.5¢ per share. The lower cost of Conservative shares yields a better return rate.
I made a spread sheet to find the best investment. The underscored entries are the input data. Put the number of seats you predict at the top and the current market prices on lines 5 and 6. Then invest in the largest expected return.
If the total ask price is less than 100%, or the total bid price is greater than 100%, then there is money to be made immediately by buying or selling a unit portfolio. However this is unlikely to occur, and may be an indication that your market figures are entered wrong (as in I lost 45.5¢ this way).
The secondary ask and bid prices on lines 7 and 8 are virtual ask and bid prices. Rather than buying a stock at current market prices, you could short all the other stocks. This is sometimes a better deal, but not often.
The expected return on the ask and bid may both be negative if the predicted number of seats falls between the ask and bid prices.
I don’t know what the risk estimate on each stock is, so I’m not sure how to do portfolio optimisation. Maybe I can get confidence intervals on the LISPOP data.
Maybe I’ll donate any profits to the NDP.