It’s becoming almost passée in the econ blogosphere to show graphs from prediction markets regarding the coming US presidential election (only 10 months to go!!). Anyway, here’s my contribution with the latest action on the Intrade markets for the Democratic party nomination, following Hillary’s win in New Hampshire:

Now the question is, was Obama an inefficient market bubble, or an efficient market responding to the best information that was available at the time, plus a sudden unexpected event?

I noticed another funny thing with the Intrade data. The prices are probabilities, and if you add up the prices for Clinton, Obama, Edwards and Gore to win the Democratic nomination, you sometimes get more than 100, which should be impossible:

Since a total over 100 is logically inconsistent, doesn’t this represent some sort of arbitrage opportunity or something? However, the excursions above 100 are brief, so maybe the market is pretty efficient.

Update: Felix Salmon identifies some real arbitrage opportunities on Intrade. Maybe it’s not so efficient after all.