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Favorite stock: aapl
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I don’t know if you were planning on keeping the market locked down and not paying it out until the hypothesis is actually proved or disproved, but if that’s the plan, you need to rethink it. First of all, it has stood as a hypothesis for some 300 years; there could be centuries yet before it’s decided. Second, thanks to Gödel’s proof, we know there are statements that can be neither proven nor disproven, and Riemann’s hypothesis could be one of these. In that case you would never pay it out, and all participants’ inkles would be locked up for all time.
If you just meant “Will it be proven by the end of 2008?” as I assumed when I made my trades, you need to cash it out. The year is now 2009, and if Riemann’s Hypothesis had been proven, it would have made big headlines.
Will the Riemann hypothesis be proven true? -
So, is this going to get cashed out at some point?
Will the Riemann hypothesis be proven true? -
Is there a reason why this market has closed but not payed out?
What will be the outcome of the YouTube vs. Viacom lawsuit? -
What happens if there’s a bailout and none of them go bankrupt?
Which of the Big 3 automakers will be the first to declare bankrupcy? -
I think the problem is simply that the payoff is linear with time. People expect investments to have exponential increases, even if the exponent isn’t much more than 1.
So, for example, I’m also invested in the Google X Prize market—much more heavily than in this market, in fact. Just now I was considering moving my money from that market to this one. Since they both pay $1/day, the moon shot one is capped at ~$2300/share, while this one is capped at ~$4400/share with the payout twice as far off, they look comparable. But investing today, I would make 4.8x with the moon shot, vs. 6.9x with this one—not a favorable comparison; even with a linear investment one would expect this market to pay off at twice the rate for twice the time.
Morever, let’s say that the moon shot never happens, so I make my 4.8x on my current investment, with the return coming in 2015. By that time, it’s reasonable to expect another, similar market to exist with a similar payoff ratio. But then, for the remaining 5 years until the amendment market pays off, I’ll expect a return of (5/6)*4.8 = 4.0x (it’s 5/6 the time, and I’m assuming payoff increases linearly with time), for a total return on today’s investment of 4.8*4.0 = 19.2×. I would triple my money compared to if I had invested in this market instead.
What if the moon shot does happen, so that I don’t get the full 4.8x? Well, I get my money back sooner, and I can reinvest it sooner. I don’t make as much on that single investment, but I’ll probably make more in the end.
I like the idea of markets like this, because I don’t want to come to this site every day to churn short-term investments, and because I like a sure thing; a stock like this should be almost the equivalent of a government bond, with a low return but high security. But even government bonds have exponential returns, and will beat out anything linear in the long run.
When will the U.S. Constitution be amended?
