The Betfair Prof: "Follow the money!"

The Betfair Prof / Leighton Vaughan Williams / 17 January 2008 / 3

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Politics betting and prediction expert Professor Leighton Vaughan Williams takes a look at where the money is ahead of this weekend's Nevada Caucuses and South Carolina Primary

Perhaps the most important, and certainly the most famous, advice that secret source 'Deep Throat' gave to the Washington Post reporters investigating President Nixon's involvement in the Watergate cover-up was to 'Follow the Money.' Woodward and Bernstein did so and got their man. Those taking the same advice on Tuesday evening were similarly well rewarded as well-backed Mitt Romney stormed into clear favouritism in the markets and a comfortable victory at the polls. After a blip in the New Hampshire Democratic primary the old certainties - that election favourites tend to win elections - was re-established.

As in the Republican New Hampshire primary, the polls and pundits had declared the race between Senator McCain and Governor Romney as a toss-up while the betting markets pointed to a comfortable victory in both cases for the eventual winners. Once again, in the battle of the polls, pundits and markets, the power of the betting markets to assimilate the collective knowledge and wisdom of the crowd had prevailed.

Following the money is one old adage, but the belief that winning creates momentum is another, in which case we might have expected Mitt Romney to gather pace in the immediate post-Michigan primary markets while John McCain would fall back. In fact, quite the reverse has occurred in South Carolina, where the Arizona Senator, as I write over two days out, is storming ahead in the trading relative to the New England Governor. If the markets are to be believed, the Governor's high hopes rest instead this Saturday in Nevada, where the markets show him a fairly comfortable favourite. Meanwhile, Mike Huckabee's focus this weekend is firmly in the Carolinas, where the Arkansas Governor's evangelical roots and Southern charm are expected to provide him with at least a solid showing against Senator McCain.

The Democratic race is proceeding for the moment at a more genteel pace, thanks to what amounted to an uncontested race in Michigan and the South Carolina race not taking place till Saturday week. In consequence, all eyes are turned to the Nevada caucuses which recent polling shows as a three-way statistical tie between Senators Clinton, Obama and Edwards. Meanwhile, one highly publicized post-debate focus group called John Edwards the overwhelming winner. Yet the betting markets two days out see this as essentially a two-horse race between Barack Obama and Hillary Clinton with the former Democratic candidate for Vice-President an also-ran.

If Senator Edwards does pull Nevada out of the bag on Saturday the prediction markets will have serious egg over their faces.

Soon we will know if we have to put Humpty Dumpty together again!

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

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Ato Chiffre | 18 January 2008

"As in the Republican New Hampshire primary, the polls and pundits had declared the race between Senator McCain and Governor Romney as a toss-up while the betting markets pointed to a comfortable victory in both cases for the eventual winners. Once again, in the battle of the polls, pundits and markets, the power of the betting markets to assimilate the collective knowledge and wisdom of the crowd had prevailed."

Polls are static and reflect voter intention at a particular point in time.

Betting markets reflect who people think might win and are dynamic; they respond to the latest news flow.

The notion that the Betfair betting market somehow predicted the result, whereas the polls did not, is questionable to say the least, in so far as there is no actual comparison to be made between the two.

Perhaps you could provide us with a graph of the Betfair market on the event, highlighting the money flow against the news flow, so that we can see at what point it was that the market moved in favour of Romney.

Bold assertiosn that the market predicted the result, without hard eveidence, do not do the cause of betting markets any good whatsoever!
tom owens | 05 February 2008

the betfair market DOES predict future events incredibly accurately. All academic research and my own personal experience confirms this. I have made thousands day by utilising the betfair market in order to identify the true market value of a given selection.
tom owens | 05 February 2008

sorry iv just re read the article/comment and Iv got my wires crossed!, please disregrd my last post; it was incorrect