Election markets have been praised for their ability to forecast election outcomes, and to forecast better than trial-heat polls. This paper challenges that optimistic assessment of election markets, based on an analysis of Iowa Electronic Market (IEM) data from presidential elections between 1988 and 2004. We argue that it is inappropriate to naively compare market forecasts of an election outcome with exact poll results on the day prices are recorded, that is, market prices reflect forecasts of what will happen on Election Day whereas trial-heat polls register preferences on the day of the poll. We then show that when poll leads are properly discounted, poll-based forecasts outperform vote-share market prices. Moreover, we show that win projections based on the polls dominate prices from winner-take-all markets. Traders in these markets generally see more uncertainty ahead in the campaign than the polling numbers warrant-in effect, they overestimate the role of election campaigns. Reasons for the performance of the IEM election markets are considered in concluding sections.
#1Erik Snowberg(California Institute of Technology)H-Index: 21
#2Justin Wolfers(UPenn: University of Pennsylvania)H-Index: 62
The favorite–long shot bias describes the long-standing empirical regularity that betting odds provide biased estimates of the probability of a horse winning: long shots are overbet whereas favorites are underbet. Neoclassical explanations of this phenomenon focus on rational gamblers who overbet long shots because of risk-love. The competing behavioral explanations emphasize the role of misperceptions of probabilities. We provide novel empirical tests that can discriminate between these competi...
Prediction Markets, sometimes referred to as "information markets," "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from ...
One of my favorite political scientists (and mentors in graduate school) defined a great idea as one he would have liked to have had himself. The Supreme Court Forecasting Project is a great idea, one I wish I had hatched. It is such a good idea that it is a little surprising no one had attempted it earlier. I commend this team and urge them, as I shall say in more detail later, to continue, expand, and perhaps redirect this undertaking. That this team combines legal academics and political scie...
forecast is not enough. And the most important economic shocks to the economy are the late shocks, which may arrive too late to be measured by the forecaster. Other events also impact, such as (in 2004) the Iraq war. Incorporating presidential approval into the model helps to control for "other" events that economic indicators ignore, but obviously only those that are observable by the time of the latest approval reading. They also don't reveal much about voters' comparative judgments of the two...
The dominant methodology for short-term forecasting of electoral outcomes uses trial-heat polls, where respondents report their current electoral preferences (not their election-day predictions). Election markets, where self-selected participants trade shares of candidates at prices predictive of election-day results, provide an alternative method that often produces more accurate forecasts. Consequently, increasing attention is being paid to this methodology. However, it is poorly understood an...
How can groups elicit and aggregate the information held by their individual members? The most obvious answer involves deliberation. For two reasons, however, deliberating groups often fail to make good decisions. First, the statements and acts of some group members convey relevant information, and that information often leads other people not to disclose what they know. Second, social pressures, imposed by some group members, often lead other group members to silence themselves because of fear ...
On July 28, 2003, Senators Ron Wyden (D-Ore.) and Byron L. Dorgan (D-N.D.) held a press conference to call attention to a DARPA (Defense Advanced Research Projects Agency) project that would allow investors to bet on future political events in the Middle East—including terrorist attacks—through a commodity-market style trading system. On July 29, newspapers responded by denouncing this “unbelievably stupid” and “grotesque” market. Later that day, the program was officially cancelled. The authors...
#1Paul W. Rhode(UNC: University of North Carolina at Chapel Hill)H-Index: 24
#2Koleman S. Strumpf(UNC: University of North Carolina at Chapel Hill)H-Index: 16
This paper analyzes the large and often well-organized markets for betting on U.S. presidential elections that operated between 1868 and 1940. Four main points are addressed. First, we show that the market did a remarkable job forecasting elections in an era before scientific polling. Second, the market was fairly efficient, despite the limited information of participants and active attempts to manipulate the odds. Third, we argue political betting markets disappeared largely because of the rise...
Little is known about the evolution of electoral sentiment over the campaign cycle. How does the outcome come into focus as the election cycle evolves? Do voters' preferences evolve in a patterned and understandable way? What role does the election campaign play? In this article, we address these issues. We translate general arguments about the role of campaigns into a set of formal, statistical expectations. Then, we outline an empirical analysis and examine poll results for the 15 U.S. preside...
The 2000 election campaign saw more polls and more reporting of polls than ever before. Even leaving aside the controversy surrounding the election night projections, especially the double calls and retractions in Florida that prompted congressional hearings, social and political critics and commentators found a lot to be concerned about in the use of polls in last year's election coverage (Harwood and Crossen 2000; Kohut 2000, 2001; Perkins 2000; Plissner 2000; Robertson 2001; Severin 2000). Bu...
Abstract null null Election forecasting is a cottage industry among pollsters, the media, political scientists, and political anoraks. Here, we plow a fresh field in providing a systematic exploration of election forecasting in Ireland. We develop a structural forecast model for predicting incumbent government support in Irish general elections between 1977 and 2020 (the Iowa model). We contrast this structural model with forecasts from opinion polls, the dominant means of predicting Ireland’s e...
ABSTRACTIn recent years, the British polling industry has encountered difficulties in its attempts to measure voting intentions in important popular consultations, notably the 2014 referendum on Scottish independence, the 2015 UK general election, and the 2016 EU membership referendum. In such a context, it is extremely valuable to explore how different forecasting models that rely on political and economic variables can be used to predict the outcome of elections. In this paper, we propose such...
#2Richard Nadeau(UdeM: Université de Montréal)H-Index: 18
Last. Bruno Jérôme(University of Paris)H-Index: 10
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Abstract Election forecasting has become a fixture of election campaigns in a number of democracies. Structural modeling, the major approach to forecasting election results, relies on ‘fundamental’ economic and political variables to predict the incumbent’s vote share usually a few months in advance. Some political scientists contend that adding vote intention polls to these models—i.e., synthesizing ‘fundamental’ variables and polling information—can lead to important accuracy gains. In this pa...
Abstract The purpose of this article is to propose a method to minimize the difference between electoral predictions and electoral results. It builds on findings that stem from established democracies, where most of the research has been carried out, but it focuses on filling the gap for developing nations, which have thus far been neglected by the literature. It proposes a two-stage model in which data are first collected, filtered and weighed according to biases, and then output using Bayesian...
Abstract The failure of public policies is ubiquitous. This paper ascribes this failure to the complex system nature of public policies. A key characteristic of complex systems is that they cannot be closely controlled or predicted. Yet the traditional approach to public policy is fundamentally based on both control and prediction, as it proceeds by comparing the expected costs and benefits of a postulated set of alternatives. In this paper I provide five pathologies of complex systems and show ...
Wenn wir davon ausgehen, dass „zwei Kopfe mehr wissen als einer“, dann sollten Gruppen auch bessere Entscheidungen fallen als eine einzelne Person. Wie aber kommt es dann immer wieder zu so katastrophalen Entscheidungen wie beispielsweise der Entscheidung der Beratergruppe um Kennedy fur die Invasion der Schweinebucht auf Kuba im Jahre 1961? Dieses Beispiel zeigt schon, dass es im Falle von Gruppen um eine besondere Art von sozialer Situation geht. So weisen Gruppen Merkmale auf, die zusatzliche...
