The Betfair Prof / Leighton Vaughan Williams / 08 September 2008 /

The Betfair Prof advises US election traders against paying too much attention to the ebb and flow of the polls.

Last night students of the American electoral scene this side of the pond had a choice between watching the agenda-setting 'Meet the Press', featuring an interview with Obama running-mate Joe Biden, or watching Andy Murray and Rafael Nadal conclude their rain-interrupted US Open tennis semi-final. I did both, courtesy of modern technology, and learned a lot more about the election from the latter.

This is not because of anything that Senator Biden said or failed to say, it was because of what it was possible to learn from the swings and roundabouts of the third and fourth sets of the tennis. Murray returned to centre stage, two sets up, although a break down in the third, a solid favourite to proceed to the final. By the time he had lost the third set he was barely favourite at all.

It did not take an exotic level of expertise in the finer points of tennis, however, to see that Murray was playing much the better tennis on the day, right through into the fourth set, as he took Nadal to a seemingly endless series of break points on the Spaniard's serve. The problem for Murray backers was that he was initially unable to convert any of these points, a failure he followed up by losing his own serve. At this point, dispassionate analysis would have revealed that the Scot was still two sets to one up, albeit a break down in the fourth, but apart from that one disastrous serve game was playing much the better tennis. No matter, the markets reacted (over-reacted, I propose) with alacrity to the new state of affairs, trading the world no. 1 on Betfair at a very hot [1.6] or so. I might even venture that many of those watching the match in the hope and expectation of a Murray win will have turned over at this point, though not necessarily, I suspect, to watch 'Meet the Press'. The rest is history as the man playing the better game overcame the blip to win the match comfortably.

There is a lesson in what happened at the tennis for students of the American electoral scene, and it is this. In trading the election markets, at least long-term, I would advise against paying too much attention to the ebb and flow of each individual opinion poll and chance event. These will drive the market, as they did when Barack Obama opened up a very healthy 8-point lead in the Gallup tracking poll in the wake of the Democratic convention. The USA Today/Gallup numbers issued a few hours ago returned the compliment when they awarded a headline-making 10 point lead to John McCain (actually, 4 points among all registered voters, but that doesn't make as good a headline). Predictably, the markets shifted in step, shortening up the Republican for next President, though far from all the way to outright favouritism.

While there is certainly money to be made by trading short-term in and out of over-reacting markets, the lesson of last night's tennis is that in the end the election will not be won by the candidate leading the latest poll, or who won the latest news cycle, but the campaign that over the course of the match plays the strongest game. It is a lesson we can all learn from Andy Murray.

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