Those with a finely tuned political snout may already have discovered MB’s new real time election poll. The worm is available in the right hand column of the site. The worm is supplied by Betmetrix, a joint project of two ex-RBA economists. It tracks and aggregates the probability of each major party winning the 2013 Federal Election using price data from Australia’s betting markets. The worm is updated hourly and is averaged to the daily price.
Betting markets can be thought of as prediction markets, where the market prices (odds) concerning a particular event can be mapped to an implied probability that the event will occur. Empirical studies have shown that these market prices can provide accurate forecasts in a number of different settings.
BetMetrix believes that the new indicator could be an important complement to more traditional polling; helping to contextualise poll movements (for example, a limited market reaction to a surprise poll may suggest that the numbers are simply down to volatility), and potentially offering insights into variables that are not captured by national opinion polls, such as trends in marginal seats.
A few points to make. The ALP worm leaped 6% last week for the three hours that Kevin Rudd was thought to being challenging for the leadership. Unsurprisingly, yesterday, as Gillard introduced her “L-plate cabinet”, the ALP worm sank below the lowest reading registered during the depths of carbon dissatisfaction in July 2012.
It remains an open question as to whether players in political markets have any greater insight into the final election result than professional pollsters, and only time will tell whether the markets are right about the result in September. But it’s a punt we’re prepared to make.
