The Betfair Prof: "They were for him, before they were against him, before they were for him again! Why?"

The Betfair Prof / Leighton Vaughan Williams / 06 May 2008 / Leave a Comment

The Betfair Prof, Leighton Vaughan Williams, this week looks at the two biggest races hitting the news, with one winner and one loser: the 2,000 Guineas and the London Mayoral election...

He is a colt with a reputation who has responded well to training. Moreover, the race is likely to be run to suit him, as he won't be asked to quicken off the pace. I refer here not to a prescient analysis of the likely fortunes of Boris Johnson in the race to become Mayor of London, but to last Saturday's back-page analysis of the prospects of New Approach, the Jim-Bolger trained colt, winning the 2,000 Guineas.

Has his quirks before a race, according to the Post Analysis, but knows how to battle, and indeed there are other apparent similarities to the Johnson campaign for Mayor. Most obviously, both New Approach and the man offering a new approach went into the final days of the campaign as solid favourite to win. Both saw their price shorten in the final stages, and both attracted the support of some shrewd pundits.

It was the Boris market that is perhaps the more interesting to analyze on this occasion, however, primarily because it is a little difficult to explain some of the overnight odds swings. As the polls closed, the best price you could get on Betfair about Johnson was [1.14] ([7.2] Livingstone). Fast forward two and a half hours, with not a single vote counted, and the Tory candidate was easy pickings at [1.23] (Livingstone in to [5.2]), and by 9.47 am he was at his longest price ([1.27], with Livingstone available to back at a best-priced [4.7]). Thereafter the markets gradually told the tale, though there was still a tidy sum to be won if you had believed the Evening Standard headline calling Boris Johnson the winner before many of the votes had been counted. So much for traders' confidence in Evening Standard headlines, you might conclude.

So why did Boris drift overnight? Was it because the Labour Party was having a spectacularly successful night across the country? I guess not. Was it because the traders were beginning to recall what happens when a candidate is declared the runaway winner by the polls and the papers (Hillary Clinton's January comeback in New Hampshire comes instantly to mind)? After all, there is nothing like the absence of information to encourage the imagination. Perhaps there were expert analysts at Conservative HQ poring over differential turnout estimates across London and losing faith that the Tory faithful had turned out in Bexley and Bromley.

The question before us, though, is whether those trading the markets could have been right at 10pm and also right at 12.30am and again at 9.45am? Given all available information, this means explaining why Johnson was a 1 to 7 chance before he was just longer than a 1 to 4 chance before he shortened again. So they were for him before they were against him, before they were for him again? Why? I guess there's an explanation but I'd love to know for sure what it is!

And just for the record, the odds about New Approach shortened for most of the day and for most of the race. In other words, they were for him and stayed with him. Then he went and lost. Why? Well, that's an easier question to answer. He just didn't run fast enough!

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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