The Betfair Prof: "Not MO-mentum but NO-mentum"

The Betfair Prof / Leighton Vaughan Williams / 25 January 2008 / 1

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Professor Leighton Vaughan Williams reflects on recent contests and takes a look ahead to South Carolina and Florida

It is more than thirty years since a little-known Governor of Georgia and peanut farmer, Jimmy Carter, won the most votes of any candidate contesting the 1976 Iowa Democratic caucus and with it the momentum that propelled him to victory in New Hampshire, and eventually the White House. Senator John Kerry repeated the first two legs of that "hat trick" in 2004, upsetting front-runner Howard Dean in Iowa and using the consequent "Big Mo" momentum to kick-start a faltering campaign all the way to the nomination and to within the length and breadth of the state of Ohio of the Presidency.

At the start of this year, conventional wisdom built on these fragments of history to conclude that winning Iowa was the ticket to bigger things. In the event, Barack Obama won Iowa but lost New Hampshire just a few days later to Hillary Clinton. Similarly, John McCain, who trailed the field in Iowa, won New Hampshire rather cosily. Did this give him new momentum? If so it's not obvious, as he went on to lose the subsequent primary in Michigan to Mitt Romney, who in turn went on to come fourth in South Carolina. I think we can perhaps conclude from all this that 2008 is so far the year not of MO-mentum but of NO-mentum.

Those seeking clues as to the outcome of the Democratic primary in South Carolina and the primaries in Florida might therefore, it could be argued, do worse than to ignore entirely the win/loss columns to date. But this would be a step too far - just ask Fred Thompson. Instead there is knowledge to be gained from a study of the betting markets, in which traders have an incentive to collate all the information and to weigh each of the contributory factors, including momentum, no-mentum, win/loss accounts, polls, pundits and so on, to reach a best guess of what is about to happen.

In my last column, written two days out from the Nevada caucuses and the South Carolina Republican race, I wrote (based on analysis of the betting markets) that Senator McCain was storming ahead in South Carolina while Governor Romney was a comfortable favourite in Nevada. I wrote on the same basis that Mike Huckabee was expected to offer a "solid showing" against John McCain, which he duly did. On the Democratic side I contrasted polls which showed Senators Clinton, Obama and Edwards in a three-way statistical tie in Nevada with the betting markets which identified John Edwards as an also-ran, and he ended in Nevada with just 4 percent of the vote.

In each case the betting markets called the result spot-on, two days out.

On the same basis, a day out from the Democratic South Carolina primary, and four days out from Florida, the markets are calling South Carolina for Barack Obama, while Florida Democrats and Republicans look set to cast most votes for Hillary Clinton and Mitt Romney respectively.

Assuming that these best estimates of the outcomes, based on information available to the markets on the morning of Friday 25 January, turn out to be correct, we will on Wednesday morning find ourselves still in a real and very exciting race for the keys to 1600 Pennsylvania Avenue.

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Nick G | 28 January 2008

good article. this stuff is so closely aligned to the'wisdom of crowds'.

on the question of who wins the election, its clear that Hilary is going to get the presidency, but then may be there are some skeletons in the closet. We shall see.