Forget the dullness of polls; let the markets show you who is mostly likely to win the 2008 Presidential Race.

The Dumb Agent Theory says that, assuming markets are efficient, any price of any security at any given point in time reflects its true value, or as true as can possibly be assessed. Along these lines then, it makes sense that prediction markets should accurately depict the real world. As long as the market fulfills certain criteria (generally accepted to be liquidity, no insider information, for certain rewards, etc.), the prices should reflect the truth, at least as is stands for the moment.

This means that if the market predicts a 77% chance that Barak Obama will be the Democratic nominee (the percentage predicted according to Intrade.com today, March 12th, 2008), this reflects the information available to this point. If tomorrow Barak Obama decides to endorse the KKK, announces his admiration for Osama Bin-Laden and gets arrested on prostitution charges, the numbers will presumably change.

If you visit our Prediction Markets page, you will see statistics taken from various prediction markets for the 2008 United States Presidential Race, divided into the Presidential Parties: Democrats and Republicans. It will be interesting to follow them as time goes on to see how accurate they have been.

Just for the record, as they stand now:

Obama will win the Democratic nomination (77.0%)

McCain will win the Republican nomination (98%)

The democrats will win the presidential election (59%)

Let’s see how this works out.