Kuta Beach

Kuta Beach

Saturday, 21 August 2010

The Problem with Election Betting Market Predictions

The betting markets predict a win for Julia Gillard in the 2010 Australian Federal Election (see Punters Back Gillard Victory). Some people believe that betting markets are very accurate predictors of elections, but I am skeptical.

I know of many people who have put large sums of money on Labor to win. These people are people who do not want Labor to win but bet for them so that their sorrows if Labor wins can be compensated for with cash.

The Labor Party may have certain policies that are unpopular for wealthy people, e.g. the mining tax. Wealthy miners who do not want Labor to win may hedge their bets by betting big for Labor. If Labor wins, they win big money from gambling. If Labor loses, they make big money from mining. This would then skew the betting market so that it predicts a Labor victory.

No comments: