Wednesday, June 20, 2012

Intrade paths to the White House

Understanding voter dynamics is both a science as well as an industry. But direct voter surveys often don't  tell us much. The chart below shows poll numbers of voter preferences for Obama vs. Romney. Except for some movement is April, the numbers indicate a very close race  (with a plus or minus 3 percentage points). Not very informative.

Source: Bianco Research (click to enlarge)

In situations like these its helpful to turn to the betting markets like Intrade. The next chart shows Intrade probability of Obama winning the 2012 election compared with two previous probability charts that led to presidential victory.

Source: Bianco Research (click to enlarge)

The president's reelection chances are now lower than his own chances 4 years ago and even Bush's reelection probability 8 years ago. What this tells us is that even though Obama is still more likely to win (by a narrow margin), his path to the White House is far less certain.

Update: One of the reasons Obama continues to be ahead of Romney on Intrade has to do with his Electoral College advantage. Those who vote with their dollars are more likely to perform this type of analysis before making their bets. Take a look at the following table from ISI:

Source: ISI Group (click to enlarge)
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