Friday, May 02, 2008

What the Markets Say About Politics

A CNN Poll says that Obama is losing support, Hillary and he are in a statistical tie, and each hold a 4-5 point margin over McCain in head-to-head match-ups. I don't know what a superdelegate is, so I just look to the Iowa Electronic Markets to see what people who bet money on the outcomes think.
The CNN poll says that Obama's support is slipping, but the markets say much hasn't changed. As can be seen below, they clearly are putting Obama as the heads-on favorite to win the democratic primary:The yellow line is sale price for "Obama Wins Primary" shares of a dollar, which is currently around $0.70, implying the market puts Obama's chances at becoming the Democratic Presidential candidate at 70%, and this is largely unchanged as of late.

What about the Presidential race? That is a horse of a different color, and the gap is indeed closing:
The blue line represents the Democratic presidential candidate's shares, and the red line represents the Republicans. Over the month of April, there has been a closing of the gap as traders are giving the Democratic candidate a 53.3% chance of winning and the Republican candidate 47.6% as of April 30. This still is a wider margin than the polls suggest in either head-to-head match-up. I suspect traders think the undecided voters will swing Dem.

1 comment:

Anonymous said...

Nothing against the Iowa Market (or its cousins, and I love them, but a concern I have with them is the thickness of their markets. Here I don't think it is a problem, but for other forecasts it might be. Low volume could be detrimental to their forecasting accuracy. I prefer (or at least compare it to the abovementioned web sites). gives the odds at betting houses. In addition to volume being generally higher, I think, but I may be wrong, that these speculators are more diverse (another key element for forecasts based on prices to work).

That being said Obama indeed appears not to have suffered a set back in the Primary process. His odds are 3/10 versus 11/4 for Hillary and surprisingly 20/1 for former competitor Al Gore. For the presidental race he is a slight favorite at 13/10 versus 13/8 for McCain and 4/1 for Hillary.