Who's best at predicting the 2015 General Election? 'The academic experts' or 'the public'?

In the chart below, see how the public betting market on a 'hung parliament' seems to be converging on the top academic forecasters' predictions from Electionforecast.co.uk.  These academics have consistently predicted more chance of a hung parliament than the public (89% probability compared to 79% as of yesterday), and the public now seem to be coming into line.  Are the 'expert academics' winning this tug-of-war of prediction over 'Joe Public'? 

 

The conflict between academic prediction and public prediction is now the key theme of this blog.  The next article will discuss how different parts of the betting industry are claiming to represent the public forecast, and which companies can be most trusted to do so: particularly spread firms like Sporting Index or Spreadex, fixed odds firms like Ladbrokes, or the leading betting exchange, Betfair.  Over 20 years, I've worked for all three types of betting companies in the UK.  Now I'm looking at the 2015 General Election as an academic researcher, for a team led by Dr Matthew Goodwin. 

The disparity between expert and public predictions, hinges on the public faith in a Tory revival between now and the 7th May, as Ed Miliband's unproven Prime Ministerial leadership credentials are tested, along with Labour competency on key issues such as the economy.  However, the polling fortunes of the Conservatives are still not improving fast enough, if at all, to deliver them an overall majority of 326 seats.  At the same time, both Conservative and Labour prospects of an overall majority have been badly dented by the rise of UKIP and the SNP, whose support is proving more difficult to erode than the main parties expected.

On Betfair, punters have consistently given a 15%+ chance to a Tory overall majority, whereas Electionforecast have never ascribed more than a 5% chance to that outcome.

Traditionally, past results have shown a revival in the incumbent government's polling fortunes in the final months and weeks of the campaign, and a tendency for voters to 'revert to the mean' (or do what they did before).  Neither of these two trends are reflected in snapshot polling as published daily in the media.  Whilst both are factored into the top expert academic models and public prediction markets, they are more so by the public, who are invariably more bullish about Conservative chances across all markets. 

Have 'the experts' sufficiently accounted for a Tory revival with their model? Are the expert academic models unduly biased towards Labour, or 'the public markets' towards the Conservatives?  If the academics backed their own model with their own cash, they would still be betting on a hung parliament on Betfair.com. 

 

Albert Tapper (@mincer) is a former trader of political markets at the spread betting firm Sporting Index.  He now works on a leading academic project analysing the 2015 General Election, led by Dr Matthew Goodwin (University of  Nottingham).

Minor party (SNP) for major gain

Trust political predictions from academics to make money from the bookies (check the trading updates at bottom of blog)

(Original blog from 7/12/14)

The biggest change in voting intentions since the 2010 election is a collapse in overall support for three main political parties.  So called ‘Lib-Lab-Con’ support has leaked away to the SNP and Ukip. Voters are sceptical that traditional parties can handle key economic and immigration issues, they distrust the political establishment, and Labour has been scotched north of the border by the Independence Referendum.  In 2010, over 88% of UK voters supported the three main parties.  Today’s poll averages suggest just 71% will.  Some recovery of lost ground is predicted by leading academic studies, but only rising to around 76% of overall vote share.

The first implication is a ‘hung parliament’ becomes much more likely.  In other words, no party will be able to win the 326 seats required for an overall majority.  Such an outcome is now a 91% chance according to Dr Chris Henretty and colleagues.  Back in May 2010, bookies rated a hung parliament just a 36% chance (7/4).  Now the best price is 1/2 or a 67% probability (with sportingbet.com).  It’s still a good value bet.

The second implication is minor parties are going to receive more votes, principally Ukip and the SNP.  Whilst Dr Henretty forecasts Ukip will get 11% of UK votes come next May, their vote is spread far and wide, yielding just 3 seats to the Farage team.  The big seat gainers are likely to be the SNP.  Although forecast to win just 3.7% of the UK vote, a panel of polling experts deliver a universally bullish view on the SNP seat result: Baxter says 42; Bickerstaff, 48, Henretty 37 and Kellner, 45.

The spread betting firm, Sporting Index, predicts just 20-22 SNP seats, and this market should be bought at 22.  If they achieve just 30 of the 59 Scottish seats you will make 8 times your stake profit.  Alex Salmond’s recent decision to stand for the seat vacated by the Lib Dem Malcolm Bruce adds another seat to the total.  He is a 1/7 shot to win with Ladbrokes (88%), despite having to overturn a sizeable majority of 6,748.  But beware, if the SNP make no gains at all from their current total of 6 seats, you will lose (22-6) or 16 times your stake.

TRADING UPDATE (03/01/2015)....  SNP seat market currently trading at 29-31.  This means if you had taken the advice above to buy at 22 seats on 7th December 2014 - you could now close your bet before a vote is cast, and secure a 7 times your stake profit.  But remember, just like a share, spread betting prices on politics can go down as well as up.  It is a particularly volatile form of betting.   A less risky way of supporting SNP success is to bet that the SNP will be involved in any coalition, currently 13/2 with Hills.  Another tip!

TRADING UPDATE (21/01/2015)....  Hills have cut the price of the SNP being involved in any coalition to 11/2 fro 13/2.  SNP seats stand at 28-30 with Sporting Index.  Betfair forecast of Hung Parliament now 73%.  Steve Fisher forecast of Hung Parliament up to 79% from 61% at the beginning of January 2015.  Newsnight / Henretty and Co. forecast for Hung Parliament, currently 90%.  In short, all tips given above are currently returning profit. 

TRADING UPDATE (27/01/2015)....  SNP seats mid-point forecast from Sporting Index now 32.5 (see graph below for how minor party markets have moved since they opened in November 2014).

TRADING UPDATE (04/02/2015)....  Following Ashcroft Scottish constituency polling today - SNP seats now trading at 35-37 with Sporting Index. Those who took the advice of this site to buy SNP seats at 22 on 7th December 2014 can now close their bet for a 13 times their stake profit.

William Hill now make 'any coalition involving the SNP' a 9/2 chance.  Tipped here at 13/2 on 3/1/2015.

LATEST TRADING UPDATE (05/03/2015)...

A final tip (05/03/2015) -  Purchase 'turnout' (i.e. Buy!) at 69.6% with Sporting Index - see these two articles:

1) - http://theconversation.com/general-election-2015-prepare-for-a-high-turnout-survey-shows-38341http://theconversation.com/general-election-2015-prepare-for-a-high-turnout-survey-shows-38341 and

2) - http://www.ncpolitics.uk/2015/02/history-guide-turnout-will-72.html/ 

Think about:

• Scotland's new zeal for political engagement
• Ukip bringing back previous abstainers
• The closeness of the race
• A relatively large left / right policy differential between Miliband and Cameron
• Sunny, warm conditions on polling day because of global warming...

All these factors may see turnout top 70%.


Albert Tapper (@mincer) is a former trader of political markets at the spread betting firm Sporting Index.  He now works on a leading academic project analysing the 2015 General Election, led by Dr Matthew Goodwin (University of  Nottingham).