Turning individual seat odds into probabilities is vexed. For the decimal odds used by online bookmakers, the maths is simple:
The problem starts with the bookmaker’s over-round. If we sum the odds for every possible outcome, the probability exceeds 1. For the individual seat prediction markets, the over-round can exceed 1 by as much as 30%.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
