Is there any Sense in the Messi Mess?

I'll try to keep this short - just to keep it as a record of what has happened and how the betfair exchange markets have followed.

I have followed the market "Specials - Messi Next Club - Transder Window Ending 5th Oct", alongside the "English Premier League Winner 2020/21" market. 

The idea was to inspect:

  1. How the market reacted to certain news, 

  2. How much signing Messi would increase the chance of Man City to win the Premier League.

Chart: Trend of prices and significant events marked (click to enlarge)

So what I noticed was:

Was the "Messi Next Club" market ever very accurate?

There was a spell between Aug 26 and Sep 3 where it didn't appear to matter whether signing would add value to the City squad or not. The price of winning the Premier League remained more or less constant at about 1.74 (a 57% chance) when it looked like they were probably going to sign Messi (for example as short as 1.68/59% on Sep 2).  It also was the very same price when it looked like they were probably not going to get him (for example as long as 2.76/36% on Aug 4). Of course it matters though, he would clearly be a strong signing and increase the chance of Man City to win the league significantly.

There are a couple of general problem with the "Messi Next Club" market. Joseph Buchdahl lists 4 conditions for Wisdom of the Crowd to work - diversity, independence, decentralisation and aggregation.  Wisdom of the Crowd is what usually cause betfair exchange market to converge on the true probability.

Low liquidity is related to aggregation.  The prices won't converge to something true until enough information is aggregated in the market.  There was low liquidity - with only 50K matched on the main selection in the first day, up to only 100K matched by day 4.

However eventually there was alot matched on the market with just short of €900,000 matched at time of writing.

Diversity of opinion is another issue - with everyone being fed the same news from the same media, there is not much else to be able to react to.  This certainly seems to have been a factor as the "Messi Next Club" market bounced up and down while the Premier League Winners market was much more stable.

The Premier League winners was much more stable but the transfer saga did feed into the market at key points.

There were only three or four events that actually significantly moved the odds on Man City winning the Premier League.  Nothing else mattered.  

The first event was when the news broke, it took a while for the market to react.  Off the graph (before the transfer window) Man City were generally trading above evens, this seemed to drop in two steps to about 1.9 (before I started recording the markets) initially and then another drop to about 1.76 again the next day.

The second event was when Jorge Messi (Agent) was stopped by a reporter while trying to enter a car park.  He muttered a "Si" when asked if Messi was considering staying. The reaction was that Man City moved back to about 1.89.  I assume it considers this a significant event indicating that Messi would be staying put and so Man City would not be as strong.

The third event (or set of events) was the next day when Jorge Messi penned a Letter to the League.  The letter indicated that Messi still believed that the clause allowing him to leave for free was valid.  This was quickly rebuffed again by the League. Finally in this set of events Messi confirmed that he would stay.  It all happened fast but there was a significant move each time - City drastically shortened with the letter, drifted back to where it was by the time Messi confirmed.

Outside those events the price remained a steady straight line only wavering about +/-0.02 either way.

City come out of the saga still shorter than they began, but with no better chance of signing Messi.

As mentioned City had traded above 2.0 before the rumours began and shortened to 1.86 when it looked like about 30% chance of landing Messi's signature.  Now at the other end they are again about 1.86 to win the Premier League but now with no chance of signing Messi.

Does this indicate that there is still a prospect of Messi joining on loan?  In the January transfer window?  Or is it a comment on Liverpool who have played unimpressively in the preseason friendly with RB Salzburg and in the Chairty Shield vs Arsenal.  Or was the fact that City even chased Messi a signal of intent and a reminder that they are the only club in the world that could afford him.  With money like that available it's likely they will strengthen their squad in any case.

...... or is the market due another correction ?

[Update] Man City did drift further closer to their pre-saga price.  On the 12th September they traded at 1.95.  This was however after the League had started and Arsenal had all but secured victory in the early kickoff.  I expect the Arsenal result had little impact though, as Man City lengthened a little, Liverpool shortened with the same result.