Unemployment Betting

Yesterday, I wrote an oped in the AFR arguing that we should have prediction markets on unemployment.

This morning comes a press release from Centrebet:

Leading financial bookmaker Centrebet has today released the country’s first market on the next national unemployment figure, with a 5.6 to 5.7 per cent jobless rate as the opening $2.85 favourite

Their odds – and the implied probabilities – are below.

Below 5.0%	$15.00	4%
5.0 – 5.1%	$11.00	6%
5.2 – 5.3%	$7.00	10%
5.4 – 5.5%	$4.00	17%
5.6 – 5.7%	$2.85	23%
5.8 – 5.9%	$3.75	18%
6.0 – 6.1%	$6.00	11%
6.2 – 6.3%	$11.00	6%
6.4 – 6.5%	$21.00	3%
Above 6.5%	$34.00	2%

The profit margin implied by these odds is currently pretty high. Hopefully trading in this market will be sufficiently thick that it will come down.

I also hope that they’ll be able to open a market in the really policy-relevant number: unemployment in June 2010.

(xposted @ Core)

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