2008 US Presidential and Congressional Elections Prediction: The Sarah Palin effect has partially evaporated, but its remains point to a close race, come Tuesday, November 4, 2008.

No Gravatar

-

#1. Explainer On Prediction Markets

-

Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.

-

More Info:

- The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

- Prediction Market Science

- The Midas Oracle Explainers On Prediction Markets

- All The Midas Oracle Explainers On Prediction Markets

-

-

#2. Objective Probabilistic Predictions = Charts Of Prediction Markets

-

Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

-

-

2008 US Elections

-

-

InTrade

-

2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade = electoralmarkets.com

-

- This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

2008 US Elections Prediction: John McCain is now the favorite at InTrade, while all the other prediction exchanges still have Barack Obama ahead. Is InTrade quicker to incorporate the latest polls because of the bigger liquidity of its prediction markets?

No Gravatar

-

#1. Explainer On Prediction Markets

-

Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.

-

More Info:

- The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

- Prediction Market Science

- The Midas Oracle Explainers On Prediction Markets

- All The Midas Oracle Explainers On Prediction Markets

-

-

#2. Probabilistic Predictions = Charts Of Prediction Markets

-

Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

-

-

2008 US Elections

-

-

InTrade

-

2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland = electoralmarkets.com

-

- This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

2008 US ELECTORAL MAP PREDICTION: The 2008 US elections thru the prism of the prediction markets – 2008 US presidential and congressional elections – US President Prediction + US Congress Prediction – Barack Obama vs. John McCain

No Gravatar

-

#1. Explainer On Prediction Markets

-

Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out…- Intelligence in, intelligence out…-

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.

-

More Info:

- The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

- Prediction Market Science

- The Midas Oracle Explainers On Prediction Markets

- All The Midas Oracle Explainers On Prediction Markets

-

-

#2. Probabilistic Predictions = Charts Of Prediction Markets

-

Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

-

-

InTrade

-

2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland = electoralmarkets.com

-

- This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

Leading political indicators

No Gravatar

American politics does not suffer from a shortage of polls. Zogby. Gallup. Rasmussen. SurveyUSA. Mason-Dixon. Polimetrix…- In an information-glutted world, what matters is not the supply of sources, but the ability to glean trustworthy information from the larger swath of poor data.

Different polling organizations have different strengths and weaknesses. Some use “-tight screens”- to scope out likely voters- others simply sample registered voters, without making any attempt to tighten the survey base to “-likely voters.”- Tight screening is especially crucial to gauge the true state of a primary, when committed base opinion can diverge significantly from less engaged moderate voters, and more importantly, influence those moderates over time to converge to the more partisan perspective. Some use human interviewers, although recently that has given way to IVR (Interactive Voice Recording) polls (the kind where a computer talks to you and asks you to “-press 1 if you will definitely support X, 2 if probably…-”-)

I have found tight-screen, IVR polling to be the most reliable. IVR not only has no marginal cost, but it eliminates all the biases resulting from trying to give the most pleasant-sounding answer possible (the “-sexy grad student effect”- that exaggerated Kerry’-s margin by 15 points in Pennsylvania 2004 exit polling, for example). IVR possible responses can also be randomly rotated from respondent to respondent to eliminate recency biases (first and last responses in a list exaggerated because those are at the forefront of a person’-s memory of the list, not because s/he will vote that way).

The poster-child of IVR tight-screen polling success is Scott Rasmussen’-s Rasmussen Reports. I have only tracked them over the last two election cycles (2004 and 2006), but considering that 2004 was a GOP wave and 2006 a Democratic wave election, I think the data is sufficient to form a valid judgment. Rasmussen’-s track record is simply stupendous. It predicted 49 out of 50 states in 2004 correctly, usually within two percentage points of the actual outcome. In 2006, Rasmussen achieved similarly impressive results —- all the more impressive when you consider that most polling models tend to err in favor of one party or the other. (“-Likely voter”- models tend to favor Republicans, and registered voter-based models tend to exaggerate Democratic strength.)

My other favorite sources include Gallup and Mason-Dixon. Gallup comes closer to the “-registered voter”- model than the tighter Rasmussen model, so Gallup usually lags tighter-screen polls. By election eve, however, the two models usually converge. Gallup’-s election-eve congressional generic vote is hands-down the best in the business. However, their numbers for party primaries have poor predictive value, because they don’-t make much effort to hunt down likely voters.

Differing survey methods can yield very different results. Rasmussen has long shown a much closer Democratic nomination race than most established, “-registered voter”- pollsters —- most recently, it showed a 32-32 tie between Clinton and Obama, with Edwards wallowing 15 points behind. Gallup’-s last numbers tightened drastically to a 31-26 race between Clinton and Obama (Gallup’-s numbers are also hard to compare with Rasmussen’-s because Gallup includes Gore).

Many smart Democrats, notably MyDD’-s Chris Bowers, believe that Gallup and others are mistakenly including lots of “-low information voters”- who simply lag the opinions and thought processes of more-attuned Democratic partisans.

Now that more establishmentarian polling firms are coming in line with Rasmussen’-s results, one can infer that the likely voter/ Chris Bowers theory has gotten the better of the argument.

A survey of pollsters wouldn’-t be complete without knowing which ones to stay away from. Stay away from Zogby and CNN polling. James Carville’-s and Stan Greenberg’-s DemocracyCorps polling outfit is not trustworthy, either —- for example, when they doubled the percentage of blacks in an October 2006 survey sample to bump the Democrats’- generic advantage by 5 points, to reinforce the Democratic narrative of a building wave.

Lastly, partisan pollsters in a competitive election season should always be taken with a grain of salt —- they will use heuristic subtleties to create the best impression possible for their party’-s candidates. Strategic Vision, a Republican outfit, deserves a three- or four-point handicap. Franklin Pierce generated a dubious Romney result for New Hampshire right after its lead pollster, Rich Killion, went to work for the Romney campaign. Such polls should be trusted only as a last resort.

For those of us who wish to divine movements in politics futures, discerning trustworthy data from bad data is paramount. Poll-rigging is the high art of Washington, DC, and as any interest group —- or candidate —- knows, it’-s easier than easy to produce a poll that diverges wildly from reality, if the heuristics are threatening enough.

(cross-posted from my blog, The Tradesports Political Maven)

Prediction Markets vs. Political Pundits – 2006 US Senate (GOP control + individual races)

No Gravatar

…- More exactly TradeSports-InTrade and Iowa Electronic Markets VERSUS The McLaughlin Group (PBS).

Reason Magazine writes:

Weirdly, the McLaughlin Group, the fustiest of all the talking head shows, had one of the best records this cycle, with Eleanor Clift, Lawrence O’-Donnell, and John McLaughlin all predicting Democratic takeover of the Senate and calling nearly all of the close races correctly. Still, that old line about stopped clocks comes to mind.

Reality Check:

Vo, vo, vo. Not so fast. The McLaughlin Group is made up of five members. Three of them predicted the Dems in the US Senate, and so (if I’-m correct) the associated probability was 3/5 = 60%. It does not strike me as an unanimous consensus.

As for TradeSports, Professor Lance Fortnow wrote that all (NOT: “-nearly all”-) individual 2006 US Senate races were predicted correctly.

More Links:

- The McLaughlin Group (PBS + CNBC Europe)

- 2006-11-03: Transcript – Audio (MP3) – Video (MP4) -

Parting Shot:

If the small-L and capital-L libertarians at Reason Magazine sides with the leftist bloggers and media in the anti-PM backlash, and if some from-day-one prediction market supporter goes amock, then the logical conclusion is: The Prediction Markets Have NOT Arrived Yet.

The five minutes on my 15 minutes of WSJ fame.

No Gravatar

Coming from a politics-obsessed family, we (family and I) have been fans of predicting election outcomes for as long as I can remember. We are all conservative-libertarians of one hue or another, and I began writing “-wingnut”- screeds in eighth grade for my junior-high newspaper. What with the Florida Bush recount and 9/11, a superpoliticized era had dawned. My first forecast was 2002, and I got all the Senate races right but for one. Uncanny, I thought. Then came 2004, and I nailed that one too. Really uncanny–-but then again, every clock was right twice a day, and this being the high and higher tide of “-my side,”- my predictions didn’-t seem so uncanny in retrospect.

Fast forward to October 2006, and I was a junior in college with a mediocre academic record in finance and Chinese. An election was gearing up. I wanted to put my forecasting ability to the test. I also realized that, by blogging the rationales for my trades, it could become a valuable tool in my quest for a summer internship/job, to represent a side of me that my GPA didn’-t represent at all. Not exactly lacking confidence, I put $2500 where my mouth was, and soon afterwards plowed in another $1000. I shifted in and out of many positions, but the common denominator was (as I said on my own blog some days ago) that I believed the market was underestimating the intercorrelation between congressional races, and especially Senate races all over the country. In other words, I bet very heavily on the Democrats taking both houses.

Three or so weeks into my blog, I was getting scattered, but very positive feedback about my material. People in Tradesports threads began quoting it, and a major Tradesports speculator asked me for some further opinions regarding the direction of the 2008 US presidential nominations markets. (I told him not to do anything other than short Hillary, but to especially not short Barack Obama, until after the election, and I couldn’-t have any “-gut feeling”- until I had gauged what a Dem election victory would mean.) So I knew my material was good, but I was still pretty surprised, not to mention ecstatic, when WSJ reporter Jim Browning contacted me for information about election prediction markets. So I happily gave him everything he asked, and the superb WSJ article was the result. (That’-s the non-$$, Pittsburgh P-G version.) But as our conversations continued into election night, I begain to despair about my positions…-

In Virginia, George Allen had about a 12,000-vote lead with about fifteen counties remaining to vote. I knew they were in the pro-Webb counties (Fairfax, Loudoun, Richmond City…-) but those precincts ranged from barely better than even to 72-28 (Richmond). Webb would have required statistically…-.unlikely turnout and/or margins in order to win. A lot of people on DailyKos and other communities emotionally invested in a Webb victory, processing new updates literally seconds after they came, had given up on Webb. Harry Reid came on TV and his body language screamed, “-I don’-t think the Senate is in play anymore, even though I thought it was a couple of hours ago…-but that was too much to ask, anyway.”- Without Virginia, the calculations for the Democrats’- taking the Senate became very grim, very fast.

Final polls (which I had spent the previous weekend trashing) showed VA breaking for Webb, comporting well with my own intuition. As the returns came in, however, Allen seemed to have an insurmountable lead with about 96% of precints reported. I concluded that Allen would win re-election, barely. Michael Barone’-s forecast to the contrary, I noticed that the remaining precincts to report were healthy-majority Democrat (about 60-40, 65-35), but I didn’-t think that Webb would be able to cut Allen’-s lead in half–-well, maybe half, but not zero it out. (I learned only later that when Virginia says “-precincts reporting,”- it apparently does not include absentee ballots when it says that. Or it reported them before it started tallying up the actual votes from the voting booths on that day. Or something. But a bunch of absentee ballots flowed into Fairfax later that netted about 7k more votes for Webb.)
However, rewinding to that despairing moment, the Democratic machines in Richmond City, Fairfax and Loudoun had waited until all other precincts had reported before reporting. Now, I don’-t know about Virginia, but I know that in Missouri, the urban Democratic machines in STL and KC have a certain notoriety (in some circles, anyway) of waiting until every other precint has reported, and then releasing surprisingly high results (that usually imply incredible voter turnout–-certain STL precincts reporting 97%, 100+% turnout isn’-t unheard of), magically pushing the Democratic candidate over the top by a fraction of a percentage point. (I don’-t want to start a flame war here–-I think American politics is a blood sport, both sides have their different ways of playing dirty, and this was just something I didn’-t factor in.) And six to twelve months after the election, some low level Democrats get a year in jail for voting fraud. It happens like clockwork, except that this time around I don’-t think the MO Dems will need to resort to that. But I digress…-

So I figured VA was lost when it wasn’-t, and I puked up all the SENATE.GOP shorts. At one point, over 50% of my entire principal was gone. Then, after despairing for about ten minutes, I went back to the TS markets intending to try and make back what I could. Then I realized that Webb had magically jumped into a 2200 vote lead in VA with 100% of precincts counted. I had already looked at the counties and their turnout/margin statistics and figured that couldn’-t have happened, but it had. So after losing over a couple grand…-not to mention feeling like a complete idiot for throwing away $8000 by buckling at the last possible second, I hopped back on the SENATE.GOP train and rode it down to zero, and made back that entire original investment, plus about $150 left over.

So a lot of lost hair, Wheat Thins, NoDoz, bad grades and exhaustive political analysis later, I felt pretty vindicated, even though I had managed to squander 90% of the potential compensation. (I did indeed lose hair.) I had staked 1,000 shorts against SENATE.GOP.2006, well against the majority view of the market. As I recall, total volume going into the election was 35k or 40k trades, but because some significant fraction of that was the same positions being flipped back and forth between a stagnant pool of traders before I’-d arrived, it was probably closer to 5% of outstanding positions. If my money hadn’-t buttressed the market-minority’-s view, the price would have been even more inaccurate–-before election day, the price hovered around 70 percent, and without my heavy position on the “-minority”- side, it would have been closer to 80-20 in favor of the GOP holding onto the Senate. Plus, going into the election, I had stuck by my calculations even as the market had continued to erode my investment. Having that kind of confidence and analytical precision vindicated meant much more to me than $8-9000 in potential winnings lost.

–-Alex Forshaw

P.S. On that non-mercenary note, I’-m seeking an internship this summer involving event derivatives trading/research or options trading, either academia- or finance-based. If you’-re interested, please e-mail to: alex.forshaw@gmail.com

Justin Wolfers cant believe that prediction markets dont show already a clear win for the Dems in the 2008 presidential election.

No Gravatar

How Much Do Election Shakeups Affect the Nation’-s Economy? – [US politics &amp- financial markets] – by Justin Wolfers and Mark Thoma – 2006-11-03

[Justin Wolfers] And the major puzzle that I currently see? The past two years have clearly been terrible for Republicans, with Iraq deteriorating, Katrina undermining the public trust, and corruption scandals aplenty. And consequently their chances of keeping control of the House have fallen precipitously (Intrade.com charts here). But the real surprise? Prediction markets tell us that the odds of Republicans winning the White House in 2008 remain virtually unchanged. Neither the incumbency advantage coming from victory in the 2004 elections, nor the subsequent declines in Republican fortunes have shifted the odds (chart: here), and the 2008 Presidential election remains a coin flip. Stay tuned: It looks like Tuesday will be a long night. And when the counting ends, the two-year campaign for the White House begins.

My Take: Our good doctor Justin Wolfers takes his Democratic dreams for the reality (all that said in all due respect for this bright researcher). We’-re two years away from the November 2008 presidential election. The margin of error is still enormous, so today’-s market-generated probabilities (Dems: 48.6% – GOP: 48%) for the 2008 presidential race mean strictly nothing. Plus, at times, a US presidential candidate can get substantial votes from the other camp (e.g., Ronald Reagan seducing many Democratic voters, etc.).

Addendum: Mike Linksvayer has an interesting comment, attached below this blog post.

Addendum 2 (November 04): Professor Justin Wolfers has responded, in the comment area, below this blog post. (And his paper is excerpted here, on Midas Oracle.)

Faulty polls screw up the political prediction markets. – REDUX – The no polls case, now.

No Gravatar

Two days ago, I stated brashly that political prediction markets aggregate the polls, mainly. (Mike Linksvayer nuanced my propos, in the comment area.)

GOP Keeps Senate, Loses House, Betting Site Says. – [US political prediction markets] – by Ronald Kessler – 2006-10-24

One theory is that prediction markets are influenced by the results of opinion polls. But if that were true, individual polls would also influence each other. Moreover, long before the Internet and opinion polls came into existence, election betting was accurately predicting election outcomes. From 1884 to 1940, betting was conducted on Wall Street by specialized brokers called betting commissioners. The betting odds for each candidate were published daily in the New York Times and other papers. The so-called New York betting markets correctly predicted 12 of the 13 presidential elections between 1884 and 1940, according to Koleman S. Strumpf, Koch professor of economics, University of Kansas School of Business, who co-authored a paper examining the markets. In the one exception, the betting swung to even odds by the time the polls closed. The Gallup Poll, the first scientific opinion poll, began in 1935. The arrival of opinion polls and stricter anti-gambling laws drove out the New York betting markets. The Internet has led to their revival.

Paper: Historical Prediction Markets: Wagering on Presidential Elections – (PDF) – by Paul W. Rhode and Koleman S. Strumpf – 2003-11-10

My Question: Before 1935 (that’-s when George Gallup crafted the first scientific polls), what the hell those political prediction markets were aggregating, for Christ’-s sake??? And where is our good doctor Koleman Strumpf when we need him?

Previous blog posts by Chris F. Masse:

  • Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
  • Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
  • How does InTrade deal with insider trading?
  • Modern Life
  • “The Beacon” is an excellent blog published by The Independent Institute.
  • The John Edwards Non-Affair… is making Memeorandum (twice), again.
  • Prediction Markets = marketplaces for information trading… and for separating the wheat from the chaff.

Did the Korean Bomb help the Republicans?

No Gravatar

The biggest event in the news yesterday was the test of Korean Atomic Bomb, and it was bound to have political repercussions.

TradeSports has two contracts that measure the chances of GOP control after the November election- the SENATE.GOP.2006 and the HOUSE.GOP.2006.

These were both down yesterday by unusually large magnitudes given their recent volatility.

There was no other particularly bad news regarding the Republicans yesterday, hence I believe that effect of the bomb on the GOP was negative.