IF YOU believed the pollsters, America’s 2012 presidential election looked like a nail-biter. Most national surveys had Mitt Romney and Barack Obama tied; Gallup, the country’s oldest scientific polling outfit, had the challenger ahead, 49% to 48%. When the votes were counted, however, Mr Obama won by four percentage points. To many political pundits, as to Mr Romney, Mr Obama’s margin of victory came as a shock. Among bettors, however, it barely elicited a shrug: prediction markets, in which punters wager on the outcomes of elections, had always considered the incumbent a heavy favourite. An Irish bookmaker, Paddy Power, was so confident of his chances that it paid out £400,000 ($640,000) two days before the election to people who had bet on Mr Obama. Will this trick be repeated in 2016?
Though now a fringe asset class, prediction markets are in fact among the oldest exchanges in America. In the 1820s prominent supporters of candidates frequently offered public wagers on them as a demonstration of their conviction. Punters who could not afford to pony up cash would compensate with offers of public humiliation: one common wager made...Continue reading
Source: United States http://ift.tt/1TpyKFe
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