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The Betfair Prof: What the Cheltenham Gold Cup can tell us about the OTHER Big Race, and vice-versa!

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The Betfair Prof, Leighton Vaughan Williams, looks at how significant parallels can be drawn between Friday's Gold Cup showdown between Kauto Star and Denman and the other big race between two powerhouses, Clinton and Obama... But which one is Kauto?!

How many times does a 'Comeback Kid' need to come back before becoming the 'Kid'?

For William Jefferson Clinton, the answer was simple and it was in the singular. It was his unexpectedly strong showing in the New Hampshire primary against Senator Paul Tsongas of Massachusetts that established him as the frontrunner for the 1992 Democratic nomination.

The case of Hillary Clinton is far less clear. Having come back seemingly from the near-dead to win New Hampshire, the New York Senator sprang back again last week to win the big states of Ohio and Texas.

"You know what they say," she told the post-election party last week, "as Ohio goes, so goes the nation." And Ohio is particularly poignant for the Democrats, who lost the White House in 2004 only because they were unable to convince a percentage point or so of the voters to switch sides in the 'Buckeye State' that year.

The prediction markets called it right in Ohio then and they did so last week, and they also picked up the late swing of votes towards Hillary in Texas. Strangely, though, the traders in the markets were this time so blinded by the first handful of declared votes that Barack Obama was soon trading at [1.1]! Although the exit polls were showing a big break of late-deciding voters in favour of Mrs. Clinton and a result just too close to call, this handful of votes seemed to push the markets so far off a reflection of the prevailing objective probabilities that there was amazing value available for a while for those with a cool head and a steady nerve. Not for the first time those trading the markets had shown more considered judgement before they began to be deluged by a welter of fast-breaking information.

Eventually, of course, the markets settled down to reflect the true probabilities but not before the more sober judges among those trading had pocketed a healthy return as fair reward for their exertions.

So on to next time and the next test of the prediction markets. I refer to this Friday's Cheltenham Gold Cup showdown between Kauto Star and Denman. If Texas tells us anything about the likely outcome it is to put more faith in the tale to be told by the market as the runners go to post than after the runners have jumped the first of the 22 fences.

There is another lesson, though, for the state of the race in the US political arena and it harks back to the great 1964 Cheltenham showdown between Mill House, for England and Arkle, for Ireland. Mill House had recently defeated Arkle in the Hennessy Gold Cup but Arkle had the excuse that he had lost his momentum when slipping at a late fence. The build-up to the race was encapsulated in the words of John Lawrence (now Lord Oaksey) who declared: "If all goes well, if these two giants come to the last together, the crowd will get something no money can buy". He might have been talking about another race in another arena. In some parallel universe, he very probably was!

Professor Leighton Vaughan Williams is the Director of the Political Forecasting Unit and Betting Research Unit of Nottingham Business School, Nottingham Trent University, and Editor of the Journal of Prediction Markets

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