Did the markets predict the Bin Laden capture?

No: the betting markets at Intrade showed a steady downward movement in the ‘probability that Bin Laden would be captured or neutralised before midnight June 30 2011’. On May 1, the probability was deemed to be 2.7 % (down from about 10 percent a year earlier), with the close on May 2 being 99% (presumably allowing a 1% probability that the claims on the media releases would later be reversed). A very clean complete surprise.

What does this mean? For one, it means no leaks took place (though the potential monetary gain was small because this market was very thin) despite the fact that many people must have known about it beforehand. Secondly, it means the usefulness of the market to flag upcoming events or to flag the amount of inside knowledge in this case was poor.

% implied probability of capture Bin Laden by end June 2011

Author: paulfrijters

Professor of Wellbeing and Economics at the London School of Economics, Centre for Economic Performance

2 thoughts on “Did the markets predict the Bin Laden capture?”

  1. As the blog pointed out – nobody talked, or if they did, they persisted with consistent speculation about where OBL wasn’t, e.g hiding in a cave in the mountains between Pakistan and Afghanistan… Anybody for an inefficient market hypothesis for military objectives where deliberate misinformation is the key?


  2. What happened in the Pakistani stock market? Did anyone go short?

    It’s interesting to know if the operation was actually coordinated with Pakistan.


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