Prediction market bearish on NDP, but has been fooled before

The Sauder School of Business is running its prediction market yet again, as it has done in many previous elections.  Real people invest real money on the outcome of the election.

It’s a bear market for Les Oranges

In the past day, there has been a run on the market.  Investors are scooping up “Liberal majority” government shares.  If the Liberals win a majority, one share = $1.  If they don’t, the share is worth nothing.  The Majority Government Market betting is an all-or-nothing proposition.

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Liberal majority government shares have moved from a low of 7 cents on the dollar to 23 cents.  Conservative majority shares have declined to 3 cents.  NDP majority shares are now at less than half a cent.  That’s a pretty good windfall if the Orange ship comes in.

The minority government (“any other outcome”) option has risen from the low 60s a few weeks ago to 82 cents.  Still, a decent return of over 20% if that outcome is realized.

The popular vote market shows Liberal shares being traded at 38 cents with the lowest asking price at 42 cents.  The market is very bullish for the Liberals; surprising then that the majority government betting for the Liberals isn’t higher.  But are bettors getting ahead of themselves ?

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I have observed in recent years that this market mirrors media coverage of poll results, though with the added touch that people have to put their money where their mouth is.  It’s an interesting social experiment but it doesn’t necessarily predict outcomes.  The poll results are likely too dominant a consideration in investors’ behaviour.

Here are the statistics of the last day of trading prior to the BC provincial election in 2013:

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In the meantime, you still have time to make some money off of other political junkies.  There are doubtlessly some emotional bettors that will part with their hard-earned cash on Tuesday.

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