With no debates there was nothing dramatic this week in the markets, but there was something quite interesting. The top establishment GOP candidates continued to hold onto about 60% of the likelihood of victory, but Jeb Bush ceded a lot of ground to Marco Rubio.
Author: David M. Rothschild
The previous week was punctuated by Scott Walker dropping out of the race for the GOP nomination on Monday, September 21 and Marco Rubio taking up all of his likelihood for victory (and some).
The key date is Wednesday, September 16, which was the second presidential debate for the GOP. Walker never got his voice and he consequently dropped out of the race the following Monday. Rubio, who like Walker is an establishment conservative, began taking some of Walker’s likelihood right after the debate, but he really scaled upwards after Walker formally dropped out. Much of this is anticipation of him taking his: money, endorsements, and voters.
There were four tiers of candidates going into the second GOP debate. One candidate who is most likely to get the nomination, two candidates who are serious contenders, four candidates who are long-shots, and those candidates that are negligible.
1) Most likely: Jeb Bush was a clear winner last night as his stock rose from 35% to 40%. Anything that winnows out tested contenders such as John Kasich or Scott Walker is good for Bush.
2) Second tier: Marco Rubio outshined Donald Trump to take a lead in this tier. Carly Fiorina will likely steal some of Trump's poll numbers in the coming week and Trump needs to be really, really solid in the polls to maintain any shot of actually winning in the end.
3) Very Unlikely: Fiorina is still really unlikely win, but certainly lead this group now. Ben Carson will likely give polling to her, as well as Trump, and the outsider voter will solidify with Trump and Fiorina. Walker and Kasich both tumbled into the fourth tier.
4) Negligible: Ted Cruz, Mike Huckabee, Chris Christie, and Rand Paul now welcome Kasich and Walker.
When I first heard about play-money prediction markets, I was skeptical that they could be as interesting, useful, or accurate as real-money equivalents. I'd played enough poker with friends to know that without a financial incentive, hardly anyone took the game seriously. Would it be different with prediction markets? I was interested enough in the underlying technology that I wanted to explore further.
There are four tiers of candidates going into the second GOP debate. One candidate who is most likely to get the nomination, two candidates who are serious contenders, four candidates who are long-shots, and those candidates that are negligible.
1) Most likely: Jeb Bush has held onto this spot for all of 2015. His first debate was weak and he has moved down from around 45% to around 35%, but he is still the commanding favorite.
2) Second tier: Donald Trump has joined the second tier by surviving. The longer he lasts on top of the polling the more he will creep up in the probability of victory. Marco Rubio has been a clear contender to Bush for all of 2015 and a strong first debate (combined with Scott Walker’s less commanding performance) has solidified his hold within this slot.
3) Very Unlikely: Ben Carson, John Kasich, Carly Fiorina are all on the upward swing into very unlikely. Kasich and Fiorina are fueled by strong first debates and Carson by strong polling. Walker joins this group on the downswing.
4) Negligible: Ted Cruz, Mike Huckabee, Chris Christie, and Rand Paul.
Jeb Bush continues his slow decline as the most likely Republican nominee nomine. He is still over twice as likely as any other person, but he down close to 35%, from 45% just before the first Republican debate.
Hillary Clinton has slid to 70% likely to win the Democratic nomination for president in 2016. This is much lower than her peak of 85% in late June and early July. But, it is still incredibly high for a non-incumbent just after Labor Day.
The Iowa Electronic Market (IEM) is a prediction market run by the University of Iowa and sanctioned by the Commodity Futures Trading Commission (CFTC). PredictIt is the other exchange sanctioned by the CFTC; it just opened in the fall of 2014. IEM is capped at $500 per person. Being the oldest continuously running prediction market on politics in the USA, people often wonder why PredictWise does not show it more prominently in the aggregation of political prediction market data. There are several reasons.
Betfair has two locations on the same website (1) exchange or market (2) sportsbook or bookie. The first, the exchange or market, is a place where people bet against each other. The second, the sportsbook or bookie, is a place where people bet against the house. Both sell the same product, which are contracts that are, canonically, worth $1 if something occurs and $0 if it does not occur.
While both sets of prices are subjected to market forces, they tend to diverge; the key distinction is where Betfair makes its money. In an exchange Betfair makes a guaranteed profit of 2-5% of the winnings, but in a sportsbooks it makes an expected profit of 5%+ of the total wager.
Pollfish, a Greek-based mobile polling platform, has been releasing a series of fascinating polls over the last few weeks. Pollfish operates as a pop-up poll inside of third-party mobile applications. Prior the Sunday, July 5 referendum they polled 7,275 Greeks. And, in the last week, they have polled 2,400 Europeans. This poll is random, but not fully representative.
While 61% of Greek voters voted NO on the referendum, 75% of Pollfish respondents (who indicated a choice for either NO or YES) indicated they would vote NO in the week leading up the voting. This result stands in sharp contrast to the majority of polls that underestimate the support for NO. The discrepancy in favor of NO, is likely driven by an undercount of older respondents in this poll.