With today's snapback, the Dow lost 777 and regained 485.
As of this evening, Intrade says the probability of a bailout bill passing by Oct 31st is 85%.
(777-485)/(1-.85) = 1,946. So a bailout bill makes an expected difference of 2000 points on the Dow.
Of course this is a bogus calculation, but it's an interesting one. Not overwhelmingly on-topic for OB, but it involves prediction markets and I didn't see anyone else pointing it out. I hope the bailout fails decisively, so this calculation can be tested.
PS:Bryan Caplan understands Bayes's Rule: It's not possible for both A and ~A to be evidence in favor of B. So which of the two possibilities, "unemployment stays under 8% following a bailout" and "unemployment goes over 8% following a bailout", is evidence for the proposition "the bailout was necessary to prevent economic catastrophe", and which is evidence against? Take your stand now; afterward is too late for us to trust your reasoning.
Email fastmoney-web@cnbc.com and tell them why a statement like this...
As you can see from the chart, “there’s big volatility in this market and big volatility never happens in the middle (of a cycle). By all accounts big volatility only comes at the top or the bottom,” Worth says. And this certainly isn't the top.
...is nonsense. And that Worth should be challenged to provide a ton of references to back up his claim.
With today's snapback, the Dow lost 777 and regained 485.
As of this evening, Intrade says the probability of a bailout bill passing by Oct 31st is 85%.
(777-485)/(1-.85) = 1,946. So a bailout bill makes an expected difference of 2000 points on the Dow.
Of course this is a bogus calculation, but it's an interesting one. Not overwhelmingly on-topic for OB, but it involves prediction markets and I didn't see anyone else pointing it out. I hope the bailout fails decisively, so this calculation can be tested.
PS: Bryan Caplan understands Bayes's Rule: It's not possible for both A and ~A to be evidence in favor of B. So which of the two possibilities, "unemployment stays under 8% following a bailout" and "unemployment goes over 8% following a bailout", is evidence for the proposition "the bailout was necessary to prevent economic catastrophe", and which is evidence against? Take your stand now; afterward is too late for us to trust your reasoning.