Another Friday, another sweep around the betting markets to see where the money is running for the federal election contest. Among the 5 agencies we watch, this week saw changes in the ALP price run in both directions, while changes in the Coalition price were all one way when they happened. Sportsbet pulled the ALP down from $1.26 to $1.25 over the week while Centerbet and Sportingbet bumped their price up for Labor by 2 and 3 cents respectively. On the Coalition side, Centerbet, Sportingbet and Betfair all showed contraction in their prices over the week of between 10 and 20 cents.
Another good Newspoll for Abbott this week moved the probabilities around slightly, with the Coalition now sitting on a 25.6% implied probability of victory – up six tenths of a percent from last week. That makes our time series chart of the aggregated 5 agency implied probability come in like this:
8 Comments
As we know from the NT elections, where there weren’t good polls and betting markets were wrong about the result, that betting markets follow polls.
I notice that Betfair has both Labor and the Coalition at longer odds of victory than all the other polls. This would surely suggest an implied probability of victory for neither, i.e. a hung Parliament. In fact all the odds must imply some probability (however slight) of a hung Parliament, especially as this is a “real world” possibility given the number of independents that are already there and likely to be re-elected.
Doc, the markets are actually on which party the next PM comes from – to prevent the hung parliament outcome from being an issue
Mahaut, the polls on Howard losing his seat at the last election were correct and the betting market did not reflect that, much to the benefit of many readers here.
Betting markets work differently to the polls folks. People speculate on ling shots in order to increase their hope of a dividend in case the majority is wrong.
Gamblers are more likely to speculate in such a way, and many hedge their bet by putting a fair amount on the favorite and smaller amounts on longs shots (as back up). Yet they expect the long shot will likely lose and are willing to sacrifice that amount f money because occasionally and I mean OCCASIONALLY the favorite gets rolled.
In a two horse race, where they favorite has such a clear lead in terms of form, the likelihood that the longshot will get up is actually less, since there are no other horses in the race to get in the way.
Sorry about the spelling mistakes — new fingernails is my only excuse
Doc, the odds for Betfair mean a slightly different thing to the other markets. Betfair is an ‘exchange’ in which you can bet both for or against an option, e.g. you can bet that ALP will lose, rather than that the Libs will win. When you make a ‘lay’ bet in this way, you effectively take the role of the bookie, in that you receive the ‘backers’ stake if they lost the bet, and have to pay out the stake times the odds to them if they win. This means the exchange market mechanism keeps the odds ‘fair’, i.e. they are simply the 1/implied probability. Betfair makes money by taking a commission, 5%, of the winnings. This means you don’t actually get the payout implied by the odds. If you win at odds of 2, you don’t get double your stake back (for a gain of 1 times your stake), you get 1.95 times your stake, for a gain of 0.95 times your stake.
The other betting sites are traditional bookies, so you get paid out exactly according to the odds, but the bookies have factored in an overound (to weigh the odds to their favour), such that the odds are not simply 1/implied probability.
If you look at the implied probability table, you’ll see that Possum has taken this difference into account, and even though Betfair has apparently longer odds for both sides, this isn’t reflected in lower probabilities for both.
If you defined the ‘true’ odds as being what you stand to gain times your stake, then the true Betfair odds are:
ALP 1.29
LNP 3.85
which are more comparable to the other bookies, even if they do show that the other bookies are in effect taking more than this 5% cut.
This might be different for hardcore Betfairians, because you can lower your commission from the 5% level if you’ve already wasted stupid amounts of money betting with them.
How would I go about putting on a bet that it wont come down to a hung parliament?
JENAUTHOR: Yes, wise words; and it’s called ‘laying-off’. And you know the old axiom ‘never bet on a two horse race.’