A quantitative take on election odds

I have a working theory that overall betting odds on elections are affected by what people wish would happen as much as what people think will happen. However, my theory is individual seat odds are less likely to be affected by the casual gambler and the betting odds are likely to be dominated by either (a) hardcore gamblers or (b) those with actual “on the ground” insight into what is happening – and both of these are groups I believe can offer insight into likely outcomes.

My next step is to categorise the seats into categories based on odds:

  • Very Likely = $1.17 or better, implying an 85% chance of victory
  • Likely = $1.18-$1.50, implying a 67%-85% chance of victory
  • Maybe = $1.5-1.8, implying a 55%-67% chance of victory
  • Toss-up = any worse odds

This gives me a better feel for the likelihood of an election outcome – in the past, this methodology has been successful at picking winners or identifying that it was too close to call (for the Gillard hung parliament).

Australian Federal Election Betting Odds

With this in mind things look grim for the Coalition:

  • If every single one of the 25 “Maybe” and “Toss-up” seat falls to the Coalition, they will only have 73 seats, with Labor on 74.
  • If Labor win 2 of the 25 Maybe and Toss-up seats then they will have an outright majority. If they win 1 of the 25 and can convince an independent to be speaker then Labor will have a majority.

Final thought – while the Warringah odds are close, at pixel time Tony Abbott is still in front even after the GetUp polls showing a likely loss for the Coalition. Given that Tony is a high-profile polarising figure, I’m guessing that Warringah is also affected by people betting for what they wish would happen – I just don’t know in which direction…

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Damien Klassen is Head of Investments at the Macrobusiness Fund, which is powered by Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Damien Klassen is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.

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Damien Klassen

Damien has a wealth of experience across international equities (Schroders), asset allocation (Wilson HTM) and he helped create one of Australia’s largest independent research firms, Aegis Equities. He lectured for over a decade at the Securities Institute, Finsia and Kaplan and spent many of those years as the external Chair for the subject of Industrial Equity Analysis.
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Comments

    • Strange Economics

      Well the theory it works for AFL betting. Believers believe the odds are there.
      The clubs with the most supporters like Collingwood have the lowest odds to win…

      But how many people really bother to bet on elections…probably about 5 people
      A lot less than the million betting football

    • Strange Economics

      Well the theory it works for AFL betting. Believers believe the odds are there.
      The clubs with the most supporters like Collingwood have the lowest odds to win…
      But how many people really bother to bet on elections…

  1. People who will lose a lot of money on one party should be backing the other party. In this case, many people should be backing labor hard even at low odds. The fact is, even my mortgage broker mate has put money on the libs despite having his livelihood depending on it. I think libs would be $10 if it wasn’t for lib voters liking the big odds.

  2. Isn’t this a similar methodology to what Mark the Ballot does: https://www.macrobusiness.com.au/2019/05/polls-betting-markets-deliver-labor-little-landslide/

    Also, re this: Given that Tony is a high-profile polarising figure, I’m guessing that Warringah is also affected by people betting for what they wish would happen – I just don’t know in which direction…

    I put $500 on Abbott when Steggall was in her honeymoon phase – was about $1.80 at the time I think. I would be more than happy to lose that bet!

    • Damien KlassenMEMBER

      The methodology is similar – I just like to boil it down to the few key categories though, and I don’t trust betting markets on high profile or close races.
      Your point on Abbott is exactly why I don’t trust his odds! There are plenty of people who will be betting against him because of the extra pleasure they will get if he loses or for him for the extra pleasure they will get if GetUp loses.

  3. Tassie TomMEMBER

    $100 on Zali Steggall is the easiest $95 you’ll ever make. She’s been 56:44 up since she threw her hat in and it hasn’t moved. My prediction on election night: Zali Steggall 56:44

    PS – If Liberal couldn’t win Braddon when Justine Keay was ousted as being an agent for a foreign power and forced them into a by-election, I can’t see how they’re going to win it now.