Saturday, April 10, 2004

New sidebar addition: latest political odds 

Tradesports is a great site, but let's face it, it's a pain to navigate if all you want to do is find out the latest odds. So I've added an odds summary to the Odd Hours sidebar. The numbers I'm including are
  • Bush's reelection chances;

  • his chances of winning individual swing states;

  • chances of various pols receiving the Democratic VP nomination;

  • and a few other miscellaneous odds (e.g. the chance Bin Laden will be captured by the end of the year).

I'll be updating these numbers at least once a week.

If you're not familiar with the way Tradesports works, they run a futures market where people can buy and sell contracts on future events. If I buy one share of Bush winning the election, in November that share will be worth either 10 dollars (if Bush wins) or it will be worthless (if Kerry wins). The basic principle of the market is that if I think Bush has a 50% chance of winning, I should be willing to pay 5 dollars (50% of 10 dollars) for that share. The most recent sale price for a share of Bush was $5.83, meaning someone (the buyer) thought Bush had a greater than 58.3% chance of winning and someone else (the seller) thought Bush had a less than 58.3% chance.

In theory, the most recent sale price at a futures market takes all available information into account to arrive at an accurate estimate of the probability an event will happen. Amazingly, this really seems to work in practice. Futures markets have a better track record than polls when it comes to predicting election outcomes.
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