Prediction Markets Update (September 17, 2008)

Although Nate Silver’s PECOTA model (see FiveThirtyEight) continues to indicate a 288 to 250 Electoral College advantage for John McCain over Barack Obama, today there has been a shift in the prediction markets data which now appear to convey a marginal advantage to Mr. Obama. Specifically, the 2008.PRES.OBAMA Intrade contract has rallied 1.8 points and is now trading at 50.7, wheras the 2008.PRES.McCAIN Intrade contract has sold off 1.9 points and is currently trading at 48.6.

Looking at the state-by-state contracts, it appears (based upon my cutoff price point of 55 for allocating Electoral College votes) that Mr. Obama currently holds a 264-247 lead over Mr. McCain, with Nevada (5 Electoral College votes), Virginia (13 Electoral College votes), and Colorado (9 Electoral College votes) representing “swing” states. Based upon yesterday’s prices, Nevada and Virginia were being counted as McCain states, but both NEVADA.REP and VIRGINIA.REP have sold off enough that they now count as swing states.

The big change today is in the price of the NEVADA.DEM contract; it is currently trading for 58.3, compared with only 45 yesterday. Considering how poorly the U.S. stock market performed today, in retrospect I would have been smart to have shorted the US stock market and gone long in 2008.PRES.OBAMA yesterday, but of course hindsight is always superior to foresight! However, since NEVADA.REP is trading for 50, it is still premature (based upon the arbitrary algorithm that I have selected) to “award” Mr. Obama with Nevada’s 5 Electoral College votes (note: since the prices reported by Intrade are not necessarily synchronous, it is possible for the sum of the .DEM and .REP state contract prices to exceed (or be less than) 100 at any given point in time).

Addendum: September 17, 2008 Electoral College Vote allocation

Barack Obama (264): California (55), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), New Hampshire (4), New Jersey (15), New Mexico (5), New York (31), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Washington (11), and Wisconsin (10)

John McCain (247): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Florida (27), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Carolina (15), North Dakota (3), Ohio (20), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

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