Over the last few days someone has been taking part in the Sauder School of Business Prediction Market for the 2013 BC Election and they have been buying up BC Conservative popular vote and seat shares for very high prices. What this highlights is that as long as there is not a lot of money and few active traders in the market it is not that hard to manipulate the market.
As of yesterday the market only had $7,879 invested and the trading volumes have been less than 100 shares in each of the three markets till about three days ago. Today we saw 450 Conservative seat shares change hands and over 200 in the popular vote market. This is much higher than on any other day before but still only amounts to a total of $80 to $85 in value.
Since the Sauder School Prediction Markets have partnered with the Global and Mail, the small trading volumes are getting press everyday. As I writing this the market has the BC Conservatives at 17.6% and predicted to win 8 seats, both of these results are not even close to what all the other evidence is saying about the election. The fact that a small amount of trades can influence the results of the market is not good.
Until there a lot more active traders in the market, it will be possible to significantly manipulate the market without a lot of money.
The bright side of this for people is that there are people out there willing to part with their money for the benefit of their party. There is good money to be made in NDP shares in all three markets, a 20% return between now and election day is reasonable. If you think the Liberals might get over 30% of the vote and take 25 seats, there is money you can make.
If you were to only invest in buying NDP majority government shares, something that everyone that knows anything about BC politics knows is going to happen, you will make a 6.1% return on election day.
The more people that take part in the market, the more the results will reflect the wisdom of the crowd. Ideally there would be 1000 to 2000 investors putting in a total of $100,000.