The U.S. presidential election campaign is now in the home stretch. Yet I remain confused by the welter of polls and their many interpretations. I read a quote in a recent Newseek magazine: Another day, another 37 new statewide polls.1 Do the polls predictably measure voting behavior? Do we really care about national polls when national elections are resolved state by state? What adjustments must be made to polling figures to remove their bias? Can landline telephone polling reach the critical Millennium Generation, many of whom use only cell phones? Its a bit overwhelming for me. I think Ill take the maverick path: buy a six-pack, watch a hockey game - and look to the Iowa Election Markets (IEM) for guidance.2
Citing the excellent book The Wisdom of Crowds, by James Surowiecki, the OpenBI Forum mentioned the IEM as an illustration of prediction markets in Part 1 of the BI Ensemble series.3 The IEM, established by the Tippie School of Business at the University of Iowa, allows paying participants to buy and sell future contracts on candidates to either predict the winners of elections or the vote share per candidate - and has proven remarkably prescient in forecasting national elections. Alas, the current IEM presidential market does not bode well for Senator McCain. As of October 22, Senator Obama leads on both the election winner and vote-share markets, and the disparity has increased post Republican convention. Indeed, the bid prices on the winner take all presidential market are $0.868 for Obama and $0.127 for McCain, which translate to confidence in Obamas prospects in excess of 6 to 1.
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