Tuesday, March 06, 2007

Polls vs.betting markets

This morning’s polls in The Australian suggest a Labor Victory by a landslide but betting markets suggest the Coalition will be returned. The polls predict a two-party-preferred vote of 57% for Labor which would sweep it to power. Sportingbet however was paying $1-80 for a Coalition win and $1-95 for a Labor win for a $1 bet. A news story accompaning the poll results suggested betting on a Coalition victory had received strong support over the past couple of days – one punter outlaying $20,000 for a Coalition victory.

The polls were described as being held March 2-4 so that some of the impact of the Rudd-Burke exposé must have registered. Indeed Rudd's personal approval rating fell (from 68 to 62%) and his disapproval rating increased (from 13 to 18%).

My colleague, Andrew Leigh, argues that betting markets outperform polls as election predictors and that seems sensible because people are more serious about indicating their beliefs when they have to back these beliefs with cash. But I am surprised at the betting behaviour which expresses more optimism than I now have that the Coalition will get back.

For the seat of Bennelong, Sportingbet was paying $2-60 for a McKew win and $1-37 for JWH which seems more understandable. I don’t think the lovely Maxine has a chance – nor does she deserve one.

Incidentally poll results were also provided on support for the nuclear power option which splits starkly on party lines. A majority of Coalition supporters (61%) support the nuclear option while a majority of Labor voters (52%) oppose it. Coalition supporters will vote for a more experienced leader. They also have a better grasp of environmental and greenhouse gas logic.


Sinclair Davidson said...

I think the current odds are probably the best we'll get. Rudd is brittle, and the Coalition will hammer him from now until the election.

If he can withstand the pressure then he might win, and deservedly so. But I'm not convinced he's up to it just yet (he might grow into it).

Anonymous said...

Having looked at these markets over the last few years betting markets follow polls with a lag.

The Newspoll today confirms Howard is on the nose.
It reminds of one in the 96 election campaign where one week Howard had a shocker with various verbal and physical stumbles wheras Keating looked like he was gaining momentum.
Newspoll came out and showed the largest lead in the campaign to the Liberals.
In other words people were sick and tired of Keating and didn't care what Howard did

hc said...

I agree anonymous that JWH is seen as a bit 'on the nose'. I am surprised however that the betting markets have moved back in his favour - either my perceptions of community sentiment are wrong or the market is inefficient.

I thought that without the Burke-Rudd business JWH's position would improve as Labor had to stop talking in generalities and come up with policies. I remain unsure of the impact of Burke-Rudd.

rabee said...

"that seems sensible because people are more serious about indicating their beliefs when they have to back these beliefs with cash. "

Polls ask who will you be voting for if the elections where held today. One can probably expect that people answer honestly. There is no cost to voting in Australia, we're fined if we don't vote.

Betting is a market where people reveal their expectations about who will win come election day.

If the answer to who is expected to win if elections were held today was the best predictor of who will win come election day, then the betting market and polls should give the same answer.

But that need not be the case. Individual voters may think I'm definitely leaning toward Labor today but if they pull a "Biff" on me I'm voting for the "little desiccated coconut."

The market aggregates public information about what may change voter's minds, taking polls as the best indicators of how people will vote today.

So there is an expectation in the present market that enough voters will change their minds giving a swing to the government from the present 54/46 labor lead.

Anonymous said...

Rabee, Actually when I wrote about the cash I was thinking of a remark you made yonks ago when you ask people silly questions. I think your response was something like "I'll give the issue serious consideration if you pay me $10" otherwise I'll be flippant and careless.

I assume you are saying that the poll gives people a chance to register a protest. It certainly does not seem to be true that the market is feeding data from mthe polls. Indeed my mermory is that a couple of weeks ago the market had moved slightly towards Labor. In the interim the polls have moved more decisively in Labor's favour but the market has moved in the opposite direction.

I thought Keating's 'little dessicated coconut' remark was cute too though very inaccurate if you believe the market.


Fred Argy said...

Harry the betting market was showing Labor as favourite just a few weeks ago - the first time this had happened for donkey's years. The bookies have now responded to the media coverage of Rudd's mistake and decided to reverse the odds a little. They may be right to do so because the Government seems determined to pursue Rudd (unfairly in my view, at least on present evidence) and mud-slinging could eventually start to hit its mark. That said, the liberals will need to be much more subtle. I think they overplayed their hand and people got sick to death of the incessant personal denigration. The same applies to Rudd's team, of course. They go over the top sometimes.

On Burke, the other startling development apart from Newspoll was today's comment by Andrew Bolt that Kevin Rudd's dealings with Burke were "a mistake but not so serious as the Howard Government claims". Rudd earlier convinced John Laws that he is broadly innocent on the big charge of "being indebted to Burke". And now Bolt seems to agree. Is the mood changing?

Francis Xavier Holden said...

A sensible punter bets on a favourite for a place.

But the election is for a win only. And its a two horse race. Only a fool would bet.

derrida derider said...

The obvious reason betting markets outperform polls is not that people being polled are dishonest but that they're careless. If you're putting your money where your mouth is you're going to give a lot more thought to your mouth.

Overall, though, I think the bookies odds are about right - the Coalition as slight favourite - because Howard hasn't let rip with his biggest gun (a free-spending Budget) yet.

And they also know that he's very likely to create a Tampa issue (eg a terrorism scare) if things get desperate.

Anonymous said...

DD, given today's GDP figures the RBA would be quite scared of where GNE would be if Howard did that.

Glenn Stevens has integrity and would be putting rates up before inflation started to rocket.
I hope howard does that.

On betting markets I do note no-one has told anyone what 'special' information the punters have that everyone doesn't!!
They gor the Burke fiasco wrong.

derrida derider said...

A good point about the RBA's reaction - but the goverment will be overflowing with tax reciepts so still has plenty of scope for a pork-barrelling spree without endangering the headline surplus (which is, of course, manipulable in the short term anyway).

On betting markets no-one says they're necessarily accurate - just that they should be a better predictor on average than polled expectations.

Anonymous said...

DD, if they do then the structural part of the budget further detiorates if the past is reliable.
This would lead to further steengthening in the economy when you essentially do not need it.

Malcolm Edey was making this point a few days ago.

Perhaps he might gamble they won't put rates up until after the election.

My other point is what made the punters put up their money other than misjudging the reaction of Burke & Rudd