Tyler Cowen at Marginal Revolutions has a little analysis of how some betting markets reacted to last night's presidential debate. My executive summary: no effect. That pretty much lines up with my own reaction to the debate: it was very close, with perhaps a slight edge for Kerry, but no minds were changed.

What's interesting about watching the markets is that the share prices are one step removed from the bettors' opinions. That is, people don't bet based on who they thought did a better job, they bet based on how they estimate everyone else will evaluate the candidates' performances. So with the markets split close to 65/35 in favor of Bush that doesn't mean he's expected to win 65% of the popular vote, it means that the bettors think there's a 65% chance that he'll win the electoral vote by any margin.



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