This week, betting on the vote opened with Prime Minister Boris Johnson being seen as slightly odds-on, that is, less than 50-50, to secure a majority in his pro-Brexit government. There are also high chances of a hung parliament.
Big financial players have used bookie odds to predict the outcome of politics for decades. However, these odds are, in essence, the market price of an outcome and they can only be as reliable as their opinions.
Rupert Adams (media relations manager, William Hill) said that betting markets can talk and tell stories.
“But if you read a headline such as “William Hill reduces its odds after a 100,000-pound bet”, it is worth remembering that this bet is only one person’s opinion.
Although there are restrictions on politics betting in the United States and France it is growing steadily in Britain. It generates headlines in local media and is seen by some investors, especially those who are wary of opinion polls, as a reliable barometer of the outcomes that will affect billions of dollars worth of holdings.
There is also the flip side to the story: when the bookies get it wrong, such as when they deemed Remain the easy winner of the EU referendum in June 2016, or when they rated Hillary Clinton as the favorite to defeat Donald Trump in the U.S. Presidential election later that year, there is a lot of outcry.
Set the odds
While I cannot speak for other bookmakers, I do spend a lot of time researching my markets. I go to lectures, meet politicians, network with journalists and offer sympathy to civil servants whining about their latest policy. This is because I believe it gives me the best chance to stay ahead of the curve. Although PS3m was traded on Betfair’s platform, the settlement price is a result of the average of all bets. There are thousands of traders in that market. Some are more informed than average politicians trader, but many others are not. It’s similar to the “wisdom among crowds” and a large pig. There could be a range of 5 to 10 stone in weight guesses from a few people. Ask 1000 people to guess the weight of the pig and they will likely settle on a vague answer. My fellow political traders should be likened to metaphorical pig farmers, who can accurately guess the weight of a pig within a few pounds. That’s the theory.Last Updated on October 2, 2021