Forget The Polls…Follow The Futures Market To Learn The Next President

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As everyone knows, polling is an imprecise system. It has become popular to make composite polls from various sources and use them as a predictor. However, as prediction/futures markets have developed, they have shown an uncanny track record for getting an election right. These markets became popular with the development of the Iowa Electronic Market. With a prediction/futures market, an investor puts money down on the future. The markets are often considered more reliable because the speculator wants to make money at predicting the likely outcome, thus reducing the impact of his or her beliefs on those decisions.

A major player in the prediction/futures markets now is Intrade. Amazingly, Intrade picked the 2004 Presidential election perfectly up to Election Day. It picked all 50 states and the District of Columbia accurately until Drudge and other internet sites leaked exit poll results. The exit polls were notoriously wrong that year. Of the 16 exit polls, 15 overstated Kerry’s strength. Normally, this information would not be released until voting closed, but that did not happen on that Election Day. 

If Intrade repeats its 2004 results, then when voting starts on Election Day, the Intrade leader should be the next President of the United States.

Here are the current Intrade predictions:

(from Foolocracy.com)

  • http://52novels.com Rob in Denver

    Nate at FiveThirtyEight has a recent post about Intrade. He thinks people are gaming the market.

    It’s pretty obvious that this is not some sort of random walk. Rather, every so often, some individual trader or some small group of traders are shorting all the Obama contacts in bulk and resetting the entire market. The markets then organically climb back upward until the rogue trader strikes again six or eight hours later. The volumes on these contracts have been very high for the past week as a result.

  • mdgeorge

    Nate Silver, who does an excellent job of “making composite polls from various sources and using them as a predictor” has pointed out some funny business in the details of the Intrade trades:


    Don’t know if this is still accurate.

  • mdgeorge

    Responding to myself and Rob: Nate’s analysis was for the presidential-level market, whereas the charts shown here (and on intrade’s front page now) use state-by-state markets. For what it’s worth.

  • http://politickr.blogspot.com Politickr

    Hi! I’m a journalist and a political day trader who follows these market developments at my blog, http://politickr.blogspot.com. If you’re interested in tracking Intrade and pundit predictions, you should check it out.