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How to profit from the Oscars online

Hollywood is gearing up for its biggest night of the year. NBC's Miguel Almaguer reports.

Traders have solidified their positions on the Oscar prediction markets — and if the wisdom of crowds holds true, Sunday will be a big night for "The Artist," the Hollywood throwback to the silent era.

In addition to being the favorite for best picture, "The Artist" is projected to be in the spotlight for best director (Michel Hazanavicius) and best actor (Jean Dujardin). Viola Davis, who played a leading role in "The Help," has the highest-valued shares in the best-actress market. Christopher Plummer ("Beginners") and Octavia Spencer ("The Help") are favored for best supporting actor and actress, respectively.

These are the clear verdicts from the Hollywood Stock Exchange and Intrade, two of the prediction markets catering to Oscar picks.

Such markets let traders "invest" (basically, bet) on the outcome of a future decision. Traders invest in a particular proposition  — for example, that George Clooney, the star of "The Descendants," will get the best-actor Oscar. If that proposition comes true, the investor would get $25 in play money for each share on the Hollywood Stock Exchange, or $10 in real money on Intrade. If it doesn't come true, the shares become worthless.

In the political sphere, prediction markets have been found to be at least as accurate as traditional polling, because traders get pretty savvy about adjusting their investments to reflect new data. The method has been applied not only to politics and the Oscars, but to flu epidemic forecasts and financial forecasts as well.

Beyond the top six categories, HSX is going with "The Descendants" for adapted screenplay and "Midnight in Paris" for original screenplay. Intrade, meanwhile, favors "Rango" for best animated feature. The trading generally reflects the mainstream thinking, but this year it has shown a shift in sentiment from Clooney to Dujardin.

Last year, the Oscars followed the Hollywood Stock Exchange's market trends in seven out of the eight categories covered. The wisdom of crowds was wrong only when it came to best director. Will the markets do as well this year? Would you care to bet? I'll update this item after the Oscars with the results.

By the way, Mitt Romney is favored to win the Michigan and Arizona GOP presidential primaries on the Intrade markets, despite the social-media buzz over Rick Santorum. Romney also leads the pack for the Republican nomination, on Intrade as well as the Iowa Electronic Markets. GOP Newt Gingrich is showing some surprising volatility on the IEM — but isn't volatility exactly what you'd expect from Newt?

Update for 11:45 p.m. ET Feb. 26: It's another seven-out-of-eight performance for the Hollywood Stock Exchange. The one big surprise: Meryl Streep, not Viola Davis, won the best-actress Oscar. Who would have thought Streep would be the underdog in the pre-Oscar handicapping? If you bet on Streep today, you could have more than doubled your money on Intrade. The closing price was 35.5, and if you were lucky enough to buy in at that level, each $3.55 that you put in would get you $10. All the other top-valued picks on HSX and Intrade won their Oscars. 

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Alan Boyle is msnbc.com's science editor. Connect with the Cosmic Log community by "liking" the log's Facebook page, following @b0yle on Twitter or following the Cosmic Log Google+ page. You can also check out "The Case for Pluto," my book about the controversial dwarf planet and the search for new worlds.