Punters embrace the latest betting craze
THE SEARCH FOR POLITICAL VALUE

Betting on politics, according to many, is going to be the “next best thing” as far as punting is concerned. In fact, right now it’s booming worldwide.

Fancy having a crack at the US presidential election? Well, there’s EASY money to be made if you believe that Hilary Clinton or Barack Obama will become the next President.

As I write this article on May 4, Clinton is at 2/1 and Obama is at 7/2. Bet 33 on Clinton and 22 on Obama, and you stand to win 44 if either gets up.

Put that in a bigger outlay . . . $3,300 on Clinton and $2,200 on Obama and you will win $4,400.

Betfair punters are among the many who are attacking political betting with a vengeance. Betting on politics is one of the many types of “specials” Betfair offer. If you’d like to bet on the outcome of an election, by-election or party leaders then Betfair is the place for you, especially as you can get on average 20 per cent better odds than bookmakers.

Betfair allows you to bet on politics “in-play” (as the event happens), so you can keep betting throughout the year but also at election time as polls and results come in. Also, unlike traditional bookmakers, Betfair won’t close the market until an official result is declared so you can keep betting as a result gets more and more likely.

For example, millions of pounds were matched on the 2004 US election after polling had closed. So while many bookies suspended betting on the Democrats after early exit polls suggested significant gains in Florida, you could still back and lay them at 1/3 on Betfair until around 2am.

Betfair have a big range of politics betting markets. Betfair take political bets on some of the main national elections including the US, Australian and UK general elections. For the next British general election you can bet on the winning party, the number of seats they get, the party leaders and the date of the election itself. On all three major UK parties 20 per cent better odds are currently available on Betfair than on the high street.

The better odds at Betfair also allow you to use politics betting creatively as a hedge to a business situation. If you have reason to believe one party is likely to increase you tax liabilities by 10 per cent, then back them to win to cover your increased liabilities. Worried that if your favoured party loses, valuable work contracts will be lost? Lay them to cover your position.

So if you have good political knowledge or simply fancy a bet on politics, back your opinion on Betfair and be confident you’re getting a more than fair return if you’re right.

The strength of political betting can also be gauged by the following article, published by the prestigious Stanford University in the US.

It says: “On election eve, political campaign managers wanting to know how their candidate or issue will fare, could pay big money and call a pollster. Or better yet, suggests new research by Justin Wolfers, call a sportsbook. Especially if the race is tight.

“Wolfers, an assistant professor of political economy who, as a youth, worked for a bookmaker in his native Australia, followed a hunch about the predictive power of betting markets in forecasting the outcome of political elections. With Andrew Leigh of Harvard’s John F. Kennedy School of Government, he co-authored a study examining the effectiveness of three tools for forecasting the outcome of Australia’s 2001 federal elections: economic modeling, opinion polling and betting odds.

“While the study found that all three methods performed reasonably well, it introduced, for the first time in Australia, a new source of data for predicting elections . . . betting statistics from one of the country’s largest bookmakers.

“The study’s provocative conclusion is this: particularly in marginal seats, the press might better serve by reporting betting odds than by conducting polls.

“Wolfers sets the scene: “Throughout much of the election cycle the candidate on the left, Kim Beazley of the Australian Labor Party had been expected to win as prime minister in the November election. John Howard, the incumbent and leader of the Australian Liberal Party saw the tide turn in his favour in the days following the September 11 terrorist attacks on America when the population rallied around its leader.

“At about the same time, so it’s hard to untangle the two events, a boatload of Afghan refugees was found off the coast of Australia. Howard took a strong stand against allowing them to immigrate, while Beazley chose something in the middle ground and was perceived to be a weak leader. This was argued by many political commentators in Australia to be the turning point of the election.

“When the election was held on November 10, 2001, the Liberal-National Party gained 50.5 per cent of the vote and John Howard was re-elected prime minister.

“So, how did the three forecasting tools perform? In the medium term, which Wolfers identifies as one to two years out, economic modeling, based on predictions of how voters will react to various economic conditions, can be effective in picking the election-day winner.

“This is somewhat surprising, he notes, because election forecasting models have had mixed success, confounding political science researchers studying the impact of such economic indicators as unemployment and inflation on 18 postwar elections in Australia. However, if accurate economic measures are available, the forecasting power of economic modeling is quite substantial.

“Using election-eve measures of economic indicators, Wolfers found that three econometric models performed extremely well, nailing precisely the predictions of an incumbent victory in one model and missing by 0.1 per cent and 0.4 per cent in two others.

“Pre-election opinion polls should be more accurate in Australia than in countries like the United States, he points out, because voting in Australia is compulsory, eliminating the key variable of whether respondents will actually show up at the voting booth.

“Past experience indicates that opinion polls taken close to the election are quite accurate. Yet the lesson from Australia in 2001, like America’s 2000 election imbroglio in Florida, points to the potential pitfalls of polling, particularly in very tight races. ‘The night before the election, Howard was ahead in two of three major polls,’ says Wolfers.

“In contrast, data from Centrebet, Australia’s largest bookmaker, demonstrated the impact of current events on the betting odds throughout the nine months leading up to the election, by reflecting immediately the electorate’s seesawing response to such events as leaders’ televised debates and the September 11 attacks on the United States.

“By election day, an enormous amount of money had been pumped into the betting market. ‘More money had been bet on the election than on the football grand final and Howard was the favourite with odds of $1.55, suggesting a 64 per cent probability of his winning the election,’ says Wolfers. Howard won and Centrebet lost money on the election.

“Digging deeper, Wolfers found the data yielded even more impressive results for oddsmakers. Centrebet also offered odds on the outcomes in 47 regional races. In 43 of 47 cases, the betting favourite won the election, even in the marginal seats. Moreover, in the three regional races where opinion polls had been conducted, the polls correctly predicted the winner in two contests; the betting market got all three right.

“The rationale for this happening comes from finance, which says that markets are efficient aggregators of information and equilibrium prices should reflect all available information,” says Wolfers. “The data suggests the Australian betting market is extraordinarily efficient. And why not? There’s a huge incentive for participants to do their homework, collect reliable information and make sure the price is right.”

“Stateside, Wolfers anticipates political scientists will look closely at the rich data sources in the Las Vegas betting markets during the next major US election. Anyone care to make a wager on it?”

And what about the upcoming Aussie election? On May 4, Centrebet had Labor at $1.77 and the Government at $1.95. Now, here’s the latest Centrebet market on the next US Presidential race:

By Jon Hudson

PRACTICAL PUNTING – JUNE 2007