The Probability Index — a live prediction-markets index
The Probability Index is a live, browser-based prediction markets tracker that averages the biggest event contracts on Polymarket into a single headline number — "passive exposure to the market portfolio of probabilities." It is the simplest possible answer to a question Matt Levine raised, half-joking, in Bloomberg's Money Stuff newsletter: what would it look like if television commentators could say "prediction markets were up today"?
The index aggregates the largest, most-traded Polymarket contracts and reports their weighted average price. Because each contract price is a probability between 0 and 1, the headline index is range-bound between 0 and 1, mean-reverting, and has no upward drift — historically it sits in a roughly 10–29% band and spikes only when scary or uncertain events become more likely. Most of the biggest markets are long-shots ("Will [country] win the World Cup?", "Will Jesus return before 2027?"), which is why the level is low.
An interactive Lab runs backtests on thousands of resolved Polymarket binary contracts: calibration and favorite–long-shot bias, "bet YES/NO on everything" with a spread haircut, and a favorites-ETF backtest that buys every extreme favorite and reinvests — a thin edge that a realistic bid-ask spread erases, with a fat, equity-like crash tail; the all-in version eventually goes to zero. The headline index is live from Polymarket in the browser; the two-year history is a precomputed point-in-time series (built from open and since-resolved markets, so it carries no survivorship bias), extended live since the last refresh.
This is a data experiment and a toy inspired by a newspaper column — not investment advice. Probabilities are not returns, and past resolutions do not predict future events. Idea: Matt Levine, Money Stuff (Bloomberg Opinion).