

The Most Accurate Election Forecast? Hardcore Gamblers - lnguyen
http://www.huffingtonpost.com/keith-thomson/the-most-accurate-electio_b_140181.html

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ComputerGuru
This is quite brilliant... I've always felt the issues described in the
article w/ regards to political correctness and turning a blind eye to certain
legal but immoral practices in the voting system affect poll accuracies,
sometimes rather heavily; but never thought to consider the gambling market as
an alternative....

Really great read, especially the history of gambling and the elections.

Currenly betfairpredicts.com has Obama's likeliness of a win 92% to McCain's
08% (don't ask how :P). Interestingly enough, fivethirtyeight.com shows
similar figures - that's another really good and accurate resource.

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robg
538 had a post earlier this year, during the primaries I think, about how In-
trade was lagging behind their projections. That seems to make sense to me.
Smart betters use all the info at their disposal. 538 is one of the smartest
sources around. 538 was also able to highlight curious movement at In-trade
well before it became obvious that someone was manipulating the McCain margin
with heavy betting.

If I was placing any bet, I'd bet on 538's numbers - even at the state-level,
before any betting market. Better to trust many aggregates of randomish
samples (polls) over one highly-motivated, and non-random, sample. 538 goes
the step further to weight polls based on their historical accuracy and weight
samples based on predictions about party ID, demographics, etc. Just a highly
tuned model with lots of data to support the tweaks.

It will be interesting to see how close 538, versus the betting markets, came
based on electoral votes and percentage win. There's no empirical test of
likeliness.

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dejb
I just had a look at 538 and I'd defintely put my money with betfair or
intrade. There is no accounting for things like the 'Bradley effect' or other
highly correlated events on 538. I'm sure many bettors do use it as a resource
but their judgement is likely to be a lot more subtle and incorporate more
factors than the statistical analyses provided by the site. Kind of like the
way that humans are still smarter than artificial intelligence (which is
currently much like statistical techniques).

> If I was placing any bet

Well you should make a fair bit of money if 538 is accurate. Betfair has had
50K available right now for Obama at 1.08 implying a 92.5% chance which looks
pretty good considering 538 says it is 98.1%. If you bet 50K you'd have a
probabilistic profit of nearly 3 grand (50K * 1.08 * 98.1%). But when you
actually went to put the cold hard cash down I'm sure you would have some
second thoughts about 538's models. The whole point of betting markets is that
talk is cheap.

> There's no empirical test of likeliness

Yes that is a problem. If betfair was (accurately) pricing in a 10% chance of
a significant, accoss-the-board Bradley effect then there would be a 90%
chance it would not occur and 538's results would look more accurate (across
the electorates). However that 10% chance (if accurate) would be enough to
make betting according to betfair's odds profitable vs 538's odds.

In general this is reflective of the 'Black Swan' problem of uncommon events
such as a market crashes. Those that underestimate the risk can often make
money for long periods of time by betting against it. But when the risk event
strikes all those profits and more can be wiped out.

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evgen
The reason that there is not accounting for the 'Bradley effect' is that it is
highly questionable that it ever existed in the first place and its impact has
diminished to the point of being statistical noise at this point. Nate has had
several great articles on the site showing how the Bradley effect is BS.

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dejb
The 'Bradley effect' is only one of any number of possible phenomena that may
occur and distort the results. Perhaps a new phenomena will occur and it will
be named the 'Obama effect'. In 2004 the exit polls showed that Bush had very
likely lost but this was wrong. Only after the event did they they came up
with a explanation.

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fallentimes
Great article. Following the money seems to work almost every time.

Somewhat related article by Steven Levitt regarding sports gambling markets:

<http://is.gd/6ej7>

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mattmaroon
I did a lot of Intrade trading on the night of the 04 election. Suffice it to
say it isn't that cut and dry.

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ATB
Could you provide further explanation, or will you leave this hanging
mysteriously in the air, shrouded like a punter knowingly tapping his nose?

It seems cut and dry the way the article is written: Intrade/Betfair correctly
predicted 50 states. Are you going to try to make some money tomorrow night,
or is there another reason why you won't give up your closely-held betting
expertise? :-)

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mattmaroon
I don't think I can do it tomorrow because the election isn't close enough.
But yeah, I think it's pretty exploitable when they are.

People say that stock markets are efficient, but then the last couple months
show that the money there is just as prone to groupthink as anywhere else. The
same is true of Intrade. More true probably due to betting/deposit
limitations.

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fallentimes
Markets, whether sports gambling/tickets/stocks/politrix are not efficient.

I'm just glad I get to make money from them.

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dejb
You are using the techical description of "efficient markets" right? (i.e.
perfectly accurate odds). Of course by this standard you are bound to be
correct. However I'm sure you realized that by participating in and 'beating'
the market you are increasing its accuracy.

The important question is 'how useful or accurate are these markets compared
to anything else?'. I'd challenge you to find a more accurate predictive
indicator that is publicly available (even if not for free).

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mattmaroon
fivethirtyeight.com may have a more reliable method. Time will tell. An
aggregate of polls with solid math applied to it might just win by having more
data.

Now, if there were a US-legal prediction market, that would be something.

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dejb
I think it is unlikely that fivethirtyeight.com would be more reliable. The
human minds are still more subtle than statistical methods alone. However even
if 538 did prove more accurate its results would soon be incorporated into the
market by betters. The reverse is not so likely to occur.

> Now, if there were a US-legal prediction market, that would be something.

You would have to think that involving US citizens would improve the market's
accuracy. It's ironic that US-citizens can't bet.

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mattmaroon
They can if they're motivated enough. Intrade is much easier than Betfair.

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kajecounterhack
Actually, most accurate election forecast: www.fivethirtyeight.com

