Today I am looking at the individual seat betting markets. These markets are tricky to analyse because of the favourite-longshot bias problem. To reduce the impact of this problem, I multiply the odds from each seat by its square root. This has the effect of increasing the odds for longshot outcomes, and thus reducing their probability. To calculate probabilities I take the reciprocal of the odds and then adjust for the bookmaker's overround.
From the individual betting markets we can deduce which parties might win the election. For example, we can count the party that is ahead in each seat. This suggests that the punters think the most likely outcome is one in which no party secures 76 of the 150 seats to form government in their own right.
A more nuanced approach is to sum the win probabilities across all parties and all seats. This gives another estimate of the possible outcome. However, while I have taken steeps to reduce the longshot bias, it is still present. I would take two of the "Any other candidate" numbers and give one each to the Coalition and Labor. Again we can see the punters are thinking it will be a hung Parliament.
We can also use the betting market to identify the seats where the odds are close. These are the seats to watch. For this exercise, I have selected the seats where the winning probability is under 70 per cent.
Another thing we can focus in on is those seats where non-mainstream party candidates (ie the non-Coalition-Labor-Greens candidates might be competitive. Of note, in this table I have summed the probabilities across all the non-mainstream party candidates.
And finally, we can look at the seats where the Greens might be competitive.
So you used a variation of the power method and not shin to allow for the bias? Also what method did you use to remove the bookies margin or the vig?
ReplyDelete