Betting Big on Romney Win, in Possible Effort to Manipulate 2012 Election, Brought $7 Million Loss

Thursday, September 26, 2013
Mitt Romney

For some backers of Mitt Romney, the 2012 presidential loss was more than a political one. At least one wealthy supporter lost as much as $7 million on bets that may have been designed to manipulate the outcome of the election.

 

Two economists say in a new study that an anonymous trader wagered between $4 million and $7 million on Intrade bets that Romney would defeat President Barack Obama.

 

The researchers speculate that the unknown trader may have tried to alter the perception of how well Romney was doing.

 

“This trader could have been attempting to manipulate beliefs about the odds of victory in an attempt to boost fundraising, campaign morale, and turnout,” Rajiv Sethi of Barnard College and Columbia University, and David Rothschild of Microsoft Research, wrote. “It is worth knowing that a highly visible market that drove many a media narrative could be manipulated at a cost less than that of a primetime television commercial.”

 

After examining market bets placed during the end of the campaign, Sethi and Rothschild say the trader accounted for about 30% of all the money wagered on Romney in the last two weeks before Election Day.

 

“This was someone who was extremely sophisticated,” Sethi told The Wall Street Journal. “It was not someone who was dumb or stupid.”

-Noel Brinkerhoff

 

To Learn More:

One Big Trader Lost Millions Betting on Romney, Study Finds (by Neil King Jr., Wall Street Journal)

Trading Strategies and Market Microstructure: Evidence from a Prediction Market (by David M. Rothschild and Rajiv Sethi, Social Science Research Network)

Information, Beliefs, and Trading (by Rajiv Sethi)

Pundit Accountability: The Official 2012 Election Prediction Thread (by Brad Plumer, Washington Post)

Romney Suffers Worst Home State Defeat Since John Frémont in 1856 (by Noel Brinkerhoff and David Wallechinsky, AllGov)

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