Betting Markets: First Impressions

Every action/bet is predicated upon a belief of sorts. A belief is essentially an assertion of faith in ones own proposition based on the available evidence (The amount I am willing to bet signals the extent of my faith in my own belief). The problem with beliefs is that very often they are simply nothing more than compensatory gestures, hobbled together in response to signal extraction problems under conditions of uncertainty and purely designed to reduce uncertainty, ambiguity and confusion. (knowledge stability temporarily serves to down-regulate stress). The stronger that the belief is held onto the less likely one is to update it in the light of conflicting evidence (delusions are impervious to new evidence). People have faith in their own bullshit - they are too sure that they are right - when in fact, more often than not, they are guilty of attaching significance to things that simply have no significance (inappropriate salience is assigned to (benign) external stimuli that then crystalise and drive goal directed action). Sometimes they get lucky.

Highly evaluative, emotionally charged beliefs about something evoke strong feelings, and these tend to elicit a search for supporting beliefs. People that believe what you believe are seen as being more sincere and competent - the Matt Chapman Effect - so we go in search of them (sub-optimal verificationist strategies). It should not be forgotten that often people simply cannot be bothered to monitor their own decision-making processes. They arrive at conclusions but they don't know how they got there and they don't really care. They essentially remain ignorant of their own ignornace and they are resistent to learning about their own resistences.

The participants in a betting market act not on the basis of rational expectations, but on the basis of intersubjective expectations. That is traders look to one another for signals regarding how to react to the events that are taking place within the betting market. This leads to herding and information cascades, but also to increased variability, which occurs when intersubjectively shared beliefs are suddenly upended, and the betting market is forced to adjust towards a new equilibrium.

In so far as a majority of people are always trading on the back of incomplete information, whilst also being subject to (amongst others) confirmation and anchoring bias, it stands to reason that the betting market price will often take on a significance far beyond what is warranted at a particular moment in time (misattributing causation). In so far as, until the betting market closes, there is always something more than what is contained within the currently available betting market price, it stands to reason, that for most people, the betting market price serves as nothing more than a distraction.