05-11-2021, 03:51 PM
п»їBettors give McCain bid long odds.
By HARRY SIEGEL and ANDY BARR.
10/26/2008 07:13 PM EDT.
Futures traders and sports books are setting overwhelming odds that the Illinois Democrat will win the presidency on Nov. 4.
Ladbrokes, a massive online sports book based in the United Kingdom, puts the odds of an Obama win at 1-10, meaning a bettor must risk $10 to win one more. John McCain, meanwhile, is an 11-2 shot, so a dollar posted on him would pay out an additional $5.50. The site now pays out less for a bet on Obama winning in a 370-plus electoral landslide than it does for a McCain victory of any margin.
Paddy Power, Ireland's largest bookmaker, no longer gives McCain any chance at all, having called the election for Obama on Oct. 15 and paid out over a million pounds on bets for the Democrat, whose line had moved from 50-1 in May of 2005 to 1-9 when the book closed.
The wide spread between books — whose odds aren't intended to be predictive, but to split the action such that the house comes out ahead no matter who wins — stems from the relatively small size of the betting pool, which means they may not accurately represent expectations among the non-betting public.
Futures markets, in which buyers and sellers negotiate a price for a contract that pays off if a postulated event in fact occurs, are also down on McCain. An option that pays $1 should McCain win now sells for just 14 cents at Dublin-based futures market Intrade and 13 cents on the Iowa Electronic Market. Both prices are record lows.
Shortly after the Republican National Convention, McCain was a slight favorite in several markets, with a $1 option going for 54 cents on Intrade, and Ladbrokes giving the Republican 5-4 odds.
While polls show a snapshot in time of who voters want to win, betting lines and futures trades show who bettors think will win. The good news for McCain is that the gamblers have not always been right.
Just before the New Hampshire primary, Ladbrokes listed Obama as a prohibitive 1-33 shot to win, but he ended up losing that contest to Sen. Hillary Rodham Clinton.
Intrade CEO John Delaney concedes that the predictive value of his market has been "mixed" so far this year. "They were sometimes wrong during the primaries, but often showed better clarity than the polls," he said.
Trading volume on the site averages 10,000 trades a day of $1 million worth of presidential futures, up over 700 percent from 2004.
The still relatively small size of the presidential betting markets, though, has left them open to charges of manipulation. Nate Silver, founder of the widely read electoral projections Web site FiveThirtyEight, noticed in September that "something is going on over at Intrade with respect to the pricing of the Obama and McCain contracts," when Obama futures in September were priced about 10 points less than at other markets, "the equivalent of the Giants being 3-point favorites at the Bellagio Sportsbook, and 7-point favorites at the Mirage down the block."
An InTrade investigation found that one trader made repeated countercyclical buys of McCain futures large enough to raise their price — thus purchasing the options for considerably more than the same product would have cost on another market.
InTrade's numbers are now widely posted around the Web, and seen, along with poll numbers, as a reliable gauge of the candidates' prospects — meaning someone with deep pockets has good reason to bend the numbers, and thus the perception of the race.
At a posting on the InTrade site, Delaney reported that "an extensive investigation" found that the single investor responsible for the fluctuations was "using our markets in good faith and in the ordinary course of their business," and "using increased depth in these markets to manage certain risks," which he later told the New York Times could mean another "bookmaker using Intrade to hedge risk from their own customers.”
Still, the markets have historically been very accurate in general elections.
In 2004, futures traders at Intrade not only correctly priced President Bush to win, but also got the winner of each state right.
Americans are barred from participating in InTrade's presidential futures market, whose members are mostly from Europe and the Middle East, and which is currently priced to show Obama winning many crucial swing states, including North Carolina (where an option paying off $1 for an Obama win now costs 64 cents, Pennsylvania (88), Indiana (59), Ohio (75), Colorado (85), Missouri (64), Virginia (80) and Florida (66).
Iowa Business School professor Thomas Rietz, who runs the Iowa Electronic Market, said futures markets are "a lot less volatile than polls."
One reason is that "heavily partisan traders tend to hang onto contracts that they shouldn't," Rietz said. "Buy-and-hold traders buy candidates they like, [while] price setters and volatility comes from independents."
The market, which until 1996 was open only to students, operates as an educational tool, maintaining that status by capping traders at a $500 investment. It frequently operates at a loss.
Since its founding in 1988, Iowa has run two types of futures markets, a winner-take-all market for predicting the winner—which has successfully "predicted" the winner of each of all six presidential elections—and a market where participants bet on the percent of the popular vote each candidate will receive, which has been off by an average of just more than 1 percentage point. It currently shows Obama winning 54 percent of the popular vote.
Like polls, markets and betting lines tend to tighten as Election Day approaches.
Ladbrokes spokesman Seth Woods warned against overvaluing the predictive value of betting lines, recalling that in 2004, "Bush was the favorite for the vast majority of the campaign until 24 hours before Election Day, when Kerry became a marginal favorite. Kerry was as short as 1-3 on the day of the election."
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What was the probability that Barack Obama would win the US election?
On the face of it this seems an odd question. After all, he won. But before the election it was uncertain whether Obama would win, and probability is the way that uncertainty is quantified, so maybe it is reasonable to ask what that probability was.
We know that there were betting odds – a betting exchange such as Intrade allows people both to accept or make bets and so converges, at any point in time, to a certain set of odds at which people are willing to be either the better or the bookmaker. This prediction market provides a вЂprobability’ on Obama winning that kept changing for the year before the election – this is shown in Figure 1 with some of the main events of the year marked in.
'Probabilities' of Obama and McCain winning the 2008 US Presidential Election.
A вЂprobability’ of 20% means that people were willing to take and make bets at вЂ4 to 1 against’, which means that if someone put ВЈ1 on Obama winning, they would receive back ВЈ4 winnings plus their stake to make ВЈ5 in total. [I don’t usually gamble, but in January 2008 I did place an online bet of ВЈ1 on Obama at 4 to 1 odds , in the middle of a lecture to a post-graduate class in Cambridge in order to illustrate how odds transform to probabilities: this choice was treated with some derision at the time. Gambling during a lecture probably also broke some medieval statute of the University!].
But do these betting odds really represent the probability? How does this fit with how probability is taught in school? In fact what does probability mean? Does it even exist? These are reasonable questions to ask, and we quickly get into some tricky philosophical issues.
Assessing probability in a non-repeatable situation.
Let’s look at the different ways we might think about probability, and whether each way might tell us what the probability of Obama winning might have been.
The Classical idea of probability is based on equally likely outcomes: if there are $N$ possible outcomes the probability of each one is $1/N$. This is what is generally taught in schools, and works fine for coins, dice and other physical objects where it may be reasonable to assume some symmetry between the outcomes. In the election there were two main candidates, so would the probability of Obama winning be 50%? Just because there are two alternatives does not mean they are equally likely. And in fact there were up to 14 other candidates including names that could be written in, depending on the state, but a probability of 1/15 seems even more unreasonable. So the classical view does not work here. The frequency interpretation is based on what proportion of events happen in the long run: for example, we might say the probability of a dropped piece of toast landing butter-side down is 80% if that is the proportion of times it happens if we keep droping toast (in controlled conditions) for millions of times. But this interpretation is difficult to apply to specific events such as Obama becoming President since they are essentially unique. We would need to place the event in a class of repeatable opportunities that stretch into the future, such as вЂblack men becoming president’. Looking into the past we note that there have been 43 Presidents of the USA of whom precisely 0 have been black, so the current observed proportion is 0/43. Does this mean the best estimate of the probability that Obama becoming President was 0%? Clearly this would be ridiculous. Even if we were misguided enough to place Obama within this class of events, there is a better way of working out a probability which will be explained below. Another possibility that has been suggested is that there is some true underlying вЂdegree of belief’ in the statement вЂObama will be the next President’ that, given the knowledge that we have, it would be logical to hold. This proposal leaves open the question of how to estimate this quantity and does not seem helpful in this situation. Rather more attractive is the idea that there is some true underlying propensity for an event to happen – this is an objective state of the world but needs to be estimated from what we know. One mental picture for this is to consider all the possible ways in which things might turn out, and then think of what proportion of these possible futures end up with Obama being President. This approach seems a bit shaky from a philosophical point of view (can we really think of the set of вЂpossible futures’?), but means that we can think of probability as a frequency without having to think of some class into which to embed the event we are interested in. The final way of thinking of this probability comes back to the betting: the probability is essentially the odds you are willing to accept in a bet based on your own subjective judgement. The betting exchange probabilities plotted above provides a kind of group assessment. Such probabilities could be interpreted as your best current estimate of the вЂtrue’ probability (which is not directly measurable).
Alternatively, and a view that I prefer, we can say that the probability is not an estimate of any actual quantity in the outside world, but simply an assessment of the odds that You are willing to take. You don't have to actually place any bets: Your probability that Obama will be President is, say, 50% if you are indifferent between the following two options: either (a) obtaining a reward if Obama becomes President, and (b) obtaining the same reward if a flipped coin comes up heads.
The attractive thing about this interpretation of probability is that it does not matter whether the event is truly unpredictable, or whether it is pre-ordained and you just don’t happen to know how things will turn out. For example, before I flip a coin, you may say your odds are 50:50 on heads. If I flip the coin but cover up the result , your odds should not change, even though the uncertainty is now due to our ignorance rather than any essential unpredictability. If I then look at the coin but don't show you , then Your probability should still be 50%, even though mine is either 0 or 100%.
So this view says that probability does not exist , but is simply a numerical expression of Your personal uncertainty, given the current information. Rather strangely, it means that probabilities can be quantified but not measured, rather like the value of anything, whether a painting or a loaf of bread, does not objectively exist but depends on what people are willing to pay.
Assessing probabilities in repeatable situations.
Things are are made easier if we see the current event as part of a sequence stretching back into the past and forward into the future, and we have no reason to think that any member of the sequence is systematically different from any other. We call the events вЂexchangeable’, and if we are willing to assume this (which we would not for Obama), there is a neat way of assessing the probability of the next event.
An Italian actuary called de Finetti showed that if we are willing to assume exchangeability, then it is as if there is some true underlying chance for the event to happen, we just don’t know what it is. In the long run the proportion of events that occur will tend to this underlying chance.
Suppose we have observed $n$ possibilities for an event to occur, and it has actually occurred in $r$ of them? What is the chance it will occur at the next opportunity? This is a classic problem, dealt with by the clergymen Thomas Bayes in an article published in 1763 and also by Laplace in 1814. Laplace provided the simple rule:
But this number [the odds of the sun coming up tomorrow] is far greater for him who, seeing in the totality of phenomena the principle regulating the days and seasons, realizes that nothing at present moment can arrest the course of it.
showing that applying his formula in an unthinking manner can be absurd.
So suppose you are told that a bag contains a mixture of black and white balls, but you are not told the proportion of each. You draw out 10 balls, putting each back after you have drawn it, and 3 of them are black. What is the chance that the next is black? Well, assuming that the balls are well-mixed, and that you thought before you started that all proportions were equally likely, then the chance is 4/12 = 1/3.
Laplace’s law of succession can be obtained with some basic integral calculus: have a look at an explanation of Laplace's analysis.
So now you know how to use past evidence to assess the chances of future events, but only if you think that the future is going to carry on just like the past, and that can be a very dangerous assumption: if you want an example, think of the free-range turkey on Christmas Eve, happily looking forward to the next day of food and shelter, just as he has always known in the past.
Barack Obama Was The Biggest Recorded Favorite Before an Election.
Published on November 3rd, 2020 8:15 am EST Written By: Dave Manuel.
There is now just one short day before voters head to the polls to the United States to determine the next President.
Polls currently have Joe Biden way ahead, though Trump supporters will adamantly remind you that the polls were completely wrong in 2016.
How do these numbers compare to past elections?
To start, we don't have much data to rely on, as betting on the Presidential election really only started when online sports betting took off.
So, we can go back to the 2004 US Presidential election, between George W. Bush and John Kerry, as online sports betting didn't really start to take off until that point.
The 2008 election between John McCain and Barack Obama wasn't close when it came to the betting odds, as Obama entered election day as a -1250 favorite to win (which means that $1,250 would have had to have been wagered on Obama to win just $100 back - a massive favorite). These odds basically implied that McCain essentially had no shot of winning. The Republicans would end up getting mauled in this election, mainly thanks to the collapse of the subprime mortgage market and resulting fallout.
The 2012 election was a bit closer, though Obama was still a big favorite to defeat Mitt Romney, as he entered election day as a -357 favorite.
Hillary Clinton, finally, entered election day as a -400 favorite.
Hillary Clinton, however, was the lone candidate to enjoy a commanding lead at the sportsbooks prior to the election, only to lose.
In short - betting odds prior to an election don't necessarily predict the future, as evidenced by the 2016 Presidential election, when Trump "beat the odds" to shock Hillary Clinton.
11 Years Ago Today, Barack Obama Was The Heavy Favorite To Win The 2008 Presidential Election.
On an unusually warm 60 degree Nov. 4 evening in Chicago’s Grant Park, Barack Obama delivered his victory speech upon being declared the winner of the 2008 Presidential Election—becoming the first African American to be elected President of the United States.
This pivotal moment in U.S. history arrived exactly 11 years ago today.
While many Americans pondered whether the country was “ready” to elect a black President leading up to that day, one group of professionals had Obama listed as the clear favorite before the country would cast a single vote.
Wagering on the general election is a relatively new endeavor, and prediction betting markets were much less popular than they are today.
Online sportsbooks had dabbled with offering odds here and there, but a lot of the credit goes to PredictIt, who really injected the idea of betting on politics into the mainstream when it launched in 2014.
To give you an idea of how popular political betting is today: According to Pinnacle—one of the world’s most well-known sportsbooks—the amount wagered on U.S. election at just their site increased by 290 times between 2008 and 2016.
I say all of this because finding records of the general election betting odds on Obama’s victory over John McCain in 2008 have been lost to history—for the most part.
However, the consensus online appears to be that Obama was the clear favorite heading in election night. The most reputable source comes from Politico, who documented the 2008 odds from the U.K.-based sportsbooks.
Before the votes were cast, Obama was listed at 1/10 odds (-1000), and when converted to an implied probability, we can see that the oddsmakers gave him a 90.91% of winning the 2008 Presidential Election.
When removing the vigorish (a.k.a. “juice”), here’s a look at both candidates true probability of winning the election on Nov. 4 exactly 11 years ago:
2008 Election Betting Odds.
Oddsmakers had Obama listed as a heavy betting favorite, and that’s exactly how the 2008 election played out.
Obama would go on to win the general election in a landslide, receiving 365 electoral votes (52.9% of the popular vote) compared to McCain’s 173 electoral votes (45.7% of the popular vote).
But the key to futures is wagering correctly well before the outcome is known.
The return on investment on Nov. 4 for Obama’s victory wasn’t impressive since every $100 only won $10.
Timing is everything. Because in just three years, Obama went from distance longshot to heavy favorite to become the 44th POTUS on election night—and the rest is history.
And 11 years later, the volatile political climate is arguably even harder to predict, and it may be a while until we see another landslide victory.
Today, the country seems to be split on pretty much everything, regardless of the issue or topic being discussed.
But you can bet that from this point forward, the bookmakers will be the first to paint a picture of a candidate’s chances to win an election at a given moment in time due to the growing interest from the public.
Ultimately, it’s up to you to correctly guess the moment and choose when and who will beat the odds. And with that being said, here are current odds to win the general election on Tuesday, Nov. 3, 2020.
2020 Presidential Election Odds.
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