Monday, May 14, 2007

Not too early '08 political markets, plus nifty graphs

I'm not much of a gambler, but the evidence pretty clearly shows that betting markets, correctly organized, can tell us a lot about future events, and typically more than any single "expert" can predict, according to, among others, James Surowiecki who makes a convincing case in The Wisdom of Crowds.
So what do the markets tell us about the '08 elections? I know, I know--it's so early. But it's actually not that early anymore. It's practically summer, judging from all the bright white shoes I've seen around town, and campaigning during the summer before the primaries isn't so unusual, especially considering the strong incentive to start earlier in the absence of an incumbent or VP-candidate to stifle competition.
The Iowa Electronic Markets, the largest political betting market, currently shows Clinton leading Obama by a widening margin, trailed by a generic, non-Clinton, non-Obama, non-Edwards Democrat, follwed by Edwards in a distant fourth. The elephant in the IEM graph is, of course, Al Gore, who remains unannounced and therefore unlisted on the IEM. Another political exchange, Intrade, shows Al Gore third, trailing Obama and Clinton, and leading Edwards by a narrow margin. (Intrade invites you to cut and paste the code for their nifty graphs). Al Gore's graph shows an intriguingly volatile upward trend since the new year, in addition to the rise and fall of announcement expecations last year:

Price for 2008 Democratic Pres Nominee(Others on Request) at intrade.com


In the Republican race, meanwhile, a generic non-Giuliani, non-McCain, non-Romney candidate leads the market, while Giuliani is a close second, if I'm reading these graphs correctly. Intrade shows Guiliani in the lead. McCain's graph reveals the extent of his decline in popularity or perceived viability since January 1, as the field's competition has intensified:

Price for 2008 Republican Pres Nominee(Others on Request) at intrade.com


In the general election market, a generic Democrat leads a generic Republican by a wide margin. I don't know if these tell us much about what will happen in Iowa and New Hampshire, but they do tell us something about how each candidate's respective campaign is doing today.
For more information, see Slate's 2008 Political Futures guide.
Graph sources: intrade.com

2 comments:

Felix said...

Very interesting! Prices on the two markets are different. I suppose one can make some money trading on the two markets simultaneously. For example, I can sell Clinton contracts on Intrade, which is trading at 51.6 right now and buy Clinton contracts at 46.8 on IEM. If she wins, then I'll lose say, $48.4 on Intrade and gain $53.2 on IEM. Thus you make $4.8 in the transaction.

However, I suppose you'll have to have $200 tied up until the results come out. So if you factor in the time value of money, it might not be worth doing.

Any thoughts?

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