Predicting outcomes: Polls versus Betting sites, Part Deux

Does Iowa really matter? How much does it matter? Those are the questions the cable news shows tried to answer in the hours leading up to the results of the Iowa Caucus last night. Like your star quarterback getting injured the week before the big game, a dramatic shift in a betting line is expected to occur. I looked at the shifts on the betting site www.intrade.com this morning to determine what affect last nights results had on the presidential candidates chances in the New Hampshire primary and ultimately gaining his/her party’s nomination.

Democrat

(Party Nominee)                       (New Hampshire Primary)

Republican

(Party Nominee)                       (New Hampshire Primary)

There are a few interesting points here. On the Democratic side, the numbers were very straight forward. Obama’s chances in both New Hampshire and the party nomination increased, while the other’s decreased. For the Republicans, Mitt Romney’s failure to finish first gave McCain a push for the eventual nomination; however the field for New Hampshire was largely unchanged. Perhaps this is due to Huckabee’s lack of support in that state, or maybe a deep and undecided field. It isn’t clear why the Republican New Hampshire primary numbers didn’t seem to shift dramatically after last night.

The question I would raise here is why what someone thinks in Iowa should affect who I am voting for in New Hampshire (at least on the Democratic side). Shouldn’t they be totally independent? There are two reasons why subsequent primaries may be affected by previous voting patterns. The first is electability. According to MSNBC’s coverage of the Iowa Caucus last night, electability was the third most given answer when people were asked their number one reason for voting for a candidate. The 19 point increase for Obama may have occurred because they see him as more electable than his opponents. The other reason someone may switch is because his/her number one candidate may have been diminished or dropped out of the race all together.

I would argue that there is also a third reason. People joining the bandwagon. Fair-weather voters, if you will. Like all the people I see in DC walking around in Red Sox hats since 2004, voters have the ability to jump on the bandwagon too. It’s easy for someone to say they are a fan if that candidate is ahead or has shown they are a winner.

So, who should you put your money on as the primary season continues? Most gamblers would say the favorite, unless of course you decided to bet on college football this season. It isn’t clear yet, whether the gamblers are the ones jumping on the bandwagon on sites like www.intrade.com or if they are reacting or anticipating the voters jumping on the bandwagon. As we continue to monitor the trends on these betting sites we will soon find out.