Why were the political futures markets so wrong about Obama and Clinton?

So, I've been watching the action in one of the political futures markets this evening, Intrade. And the action in this prediction market has reinforced my opinion that these are less futures markets than immediate-past markets.

The price movement tends to respond to conventional wisdom and polling data; it doesn't lead them. Throughout the day and into the early evening, while polls were still open, Democratic investors, mimicking the post-Iowa c.w. and polls, believed Obama was highly likely to be the Democratic nominee. The Obama contract was trading in the lows 70s, meaning investors believed he had a 70 percent chance of being the nominee, while Hillary Clinton contracts were in the 20s.

But between 7 p.m. and 8 p.m., as the Concord Monitorbegan to post early returns showing Hillary Clinton in the lead, the contracts started to move quickly. By 8:30 p.m., with about 14 percent of the returns in and Clinton up by a 40-35 margin in New Hampshire, Obama contracts had fallen to 56 (meaning investors believed Obama has only a 56 percent chance of winning the nomination) while Clinton's rose to 46. By 9:30 p.m., with Hillary ahead 39-36 with 37 percent of the results in, the spread between the two had narrowed further. Obama was trading at about 51 and Clinton at about 47.5.

At 6 p.m., this market had written Hillary Clinton's entire presidential campaign off. At 9:30 p.m., it was calling a dead heat. What caused investors to change their minds so drastically in the space of a couple of hours? A few data points that went against the day's prevailing conventional wisdom and polls. On the Republican side, where results came in largely along the lines of both the Election Day polling data and the conventional wisdom, there's been much less movement in the political futures.