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betting markets

Feb 26, 2010

Betting Market Friday

Another Friday, another sweep around the betting markets for the looming Federal Election. Over the past week, the ALP prices offered by our five agencies changed from "not at all" thro

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Another Friday, another sweep around the betting markets for the looming Federal Election. Over the past week, the ALP prices offered by our five agencies changed from “not at all” through to increasing by 7 cents. On the Coalition side of the equation, the change over the last week was between zero and a 20 cent reduction in the offered prices:

7daychange

For all the noise over Garrett, the average increase in the probability of a Coalition victory over the last week was less than 1%.I guess the punters were far less excited over it’s consequences than was the Abbotariat in the paramilitary opinion wing of The Oz. The individual probabilities for the five agencies on our watch list come in like this:

bettingsideabarfeb26

All the agencies land within a 2.4% implied probability spread of each other, giving us a nice rounded aggregate of 75/25.

Moving along to our exciting time series chart – now with 4 observations (!!) – we find the five agency average shifting towards the Coalition over February by 2.9%.

5agencychartfeb26

About a month ago, some of you folks sent me emails – mostly about some of the maths of these markets – and you haven’t yet got a reply from me. Sorry about that, I was trying out a new email program and did indeed send a reply – I sent them straight into the draft folder, which I only realised last night. So, er… yeah, I’ll get back to you today!

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14 comments

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14 thoughts on “Betting Market Friday

  1. C@tmomma

    Poss,
    I sure hope we’re going to get some honest deconstruction of the Taverner poll in yesterday’s Fairfax press from you.

  2. Dr John

    Grog – my last piece of advice is don’t take up professional punting to pay for the slabs

  3. Grog

    [Betting on 2 horse elections can be very lucrative for the astute eg., 2007 Federal where ALP was never going to get beaten.]

    Agree – My point really was that anyone putting money on the ALP now would be rather foolish given the odds are already pretty short – unless you think they’re going to drop to $1.15 next month (which I don’t think anyone does) why would you bet now instead of then? Whereas betting on the Libs would be more attractive now given their odds and the usual sense that there is a bit of “narrowing” as time get’s closer to the eleciton.

    If amount money is the determinant of odds, then I’d argue it’s logical that the odds on the Libs would shorten, purely because there’s is little point in getitn ght emoney on thre ALP now – you might as well wait till at least after the budget, if not til th eleciton is called.

    On the other hand if you were a specualtor you’d be more likely to bet now on the Libs than later, because they’re not going to blow out too much more, and if anything bad happens to the Govt, they have a long way to come in.

    Especially with Betfair people have a chance to cover their bets – so a bet now on the Libs doesn’t necessarily mean you think they will win, but rather that you think their odds will shorten later on. (at which point, rather like an options deal, you’ll cover and make a profit before the election is even held)

  4. Dr John

    Grog
    $1.25 is currently a bit short after the price that has been previously given – it could be good odds ‘down the track’.
    Betting on 2 horse elections can be very lucrative for the astute eg., 2007 Federal where ALP was never going to get beaten.
    Also consider this – some of us can be in the situation where we “crush” and back both parties and win either way.
    With your term deposit alternative don’t forget a significant proportion of interest is paid in tax!

  5. Barking

    remember possums that many of us take our elderly parents off to the RSL on a Wednesday night to see them invest $20 on the pokies. If we could encourage then to invest 50 weeks of that at these numbers then they could be guaranteed a better return. Second, benefit is that the elite would be denied thier returns from this thinking and aware decision making element of the community.
    the continued robbing of our pensioners from afore mentioned elite is just one of the reasons why I remain a do-gooding Greeny.

  6. Grog

    Cheers Bogdanovist.

    I’d never sugest betting on an election is anything more than for fun – you’re right of couse you only would “invest” in such a bet if you thought the odds were not reflecting the true probabilty – which of course is impossible to now.

    I guess the problem is it’s not like betting on an interest rate rise where you can compare the market’s expectations through the bond market with that of the odds offered on a betting site.

  7. Bogdanovist

    grog, if you’re going to take the time lag into account (sensible if you were betting on Elections as an investment, which is probably not a sensible thing to do) then you’d expect it to never be a good investment, as long as the market is even remotely efficient.

    If there was no commission or over-round involved and the market is efficient, then your expectation over a series of bets would be to neither gain or lose anything, the bets you lose will be exactly compensated by the winning from the bets you win.

    If you think the market is not pricing the probabilities correctly, and you are correct in that claim, then you can expect over a series of bets to have an ‘edge’ over the market, and have a statistical expectation that you’d increase your starting balance. If you think you can actually quantify that edge accurately, then you’d be able to make a calculation of the value of a bet as an investment, compared to a term deposit. There are a lot of big ifs in that though.

    Generally speaking you need something that is repeated many times (like horse racing for instance) to be able to make this kind of analysis anything more than educated guesswork. Elections are basically one off events that all have their own quirks. Put some money on for a laugh, but I don’t think this is a good place to start looking for easy money from gambling…

  8. Grog

    Poss is there any way to take into acount the fact that at $1.25 the ALP is not really a good investment given you will have to wait say 7-8 months before you get you money back?

    If you’re going to bet on a favourite that is odds on, you’re not going to want to wait too long to get your money back.

    Yeah a 25% return is nice an tasty, but would it be a sensible investment, compared to say a 6 month term deposit which is guaranted at 5%?

    I recall from my B.Ec days doing calculations based on risks of investments, but they’re long behind me now. I guess I’m after if there is a point in which a bet on the ALP becomes more “economically rational” than investing in say a 5% term deposit?

  9. Warren Anderson

    Luxbet has the Coalition at $5

  10. Chasing the Norm » Blog Archive » Memo to Business: Hire better political advisors

    […] 53-47% spread, while the markets have Labor at around $1.20 to the Libs $3.80 (ie around 75% odds on favourites), add in the honeymoons due to end for Abbott, that the public always give govts a 2nd term (at […]

  11. Dewgong

    The narrowing continues!!

  12. Barking

    Some of these numbers are looking more attractive by the moment. It would be interesting, Sorry Poss, to have a running average of the tpp for the parties, imposed in scale over the betting to see the correlation. As they say in the Climate Change debate, is reality following perception, ie are the polls leading the betting or are the punters reading the market before the pollsters can get out there?
    Really enjoying this Friday special poss.

  13. AdamNeira

    The public is waking up dramatically to certain machinations of their leaders. There is a great increase in autonomous thinking and action on behalf of the electorate. How the Liberals and Labour Party play their cards will be interesting to watch. Tony Abbott is seen as a breath of fresh air and his honesty and forthrightness is being privately welcomed by many people. Kevin Rudd’s trump cards are national security and the realtive healthy state of the Australian economy compared to the rest of the world.

  14. Cuppa

    Possum,

    [I guess the punters were far less excited over it’s consequences than was the Abbotariat in the paramilitary opinion wing of The Oz.]

    The Abbottariat doesn’t operate only out of the offices of the OO. The ABC is throwing their weight into the campaign too. Check this political tirade:

    [Insular Appeal]
    http://www.abc.net.au/unleashed/stories/s2830230.htm

    written by one Chris Kenny, whose bio reads, in part:

    [He recently served as Chief of Staff to then Leader of the Opposition, Malcolm Turnbull. He was also Chief of Staff to Alexander Downer, the Minister for Foreign Affairs in the former Howard Government. In State Governments he was Director of Strategic Communications for Premier John Olsen and Chief of Staff to Premier Rob Kerin.]

    http://www.abc.net.au/unleashed/stories/s2771296.htm?site=thedrum

    And how’s this for a headline? By the way the headline is worded, someone from the Liberal Party itself could have written it!

    [Garrett ‘must go’ over insulation scheme]
    http://www.abc.net.au/news/stories/2010/02/11/2817106.htm

    They’re not even pretending to hide the bias …

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