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Election predictions are arbitrage-free: response to Taleb

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  • Aubrey Clayton

Abstract

Taleb (2018) claimed a novel approach to evaluating the quality of probabilistic election forecasts via no-arbitrage pricing techniques and argued that popular forecasts of the 2016 U.S. Presidential election had violated arbitrage boundaries. We show that under mild assumptions all such political forecasts are arbitrage-free and that the heuristic that Taleb's argument was based on is false.

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  • Aubrey Clayton, 2019. "Election predictions are arbitrage-free: response to Taleb," Papers 1907.01576, arXiv.org.
    • Handle: RePEc:arx:papers:1907.01576
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    File URL: http://arxiv.org/pdf/1907.01576
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    1. Nassim Nicholas Taleb, 2017. "Election Predictions as Martingales: An Arbitrage Approach," Papers 1703.06351, arXiv.org, revised Jul 2019.
    2. Nassim Nicholas Taleb, 2018. "Election predictions as martingales: an arbitrage approach," Quantitative Finance, Taylor & Francis Journals, vol. 18(1), pages 1-5, January.
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