Okay, this was the scare of my day, and still has me concerned:
I track the betting lines, mostly for my sports-related investments, but I’ll often glance at the US Presidential election line just out of curiosity. A couple of days ago, I saw the Biden was -180 and Trump +160. I was happy to see that. Then just today, I saw that it moved significantly in favor of Trump! It’s now Biden -155 and Trump +130. That’s a huge move over just 2-3 days. Why??? It’s scary because, like the stock market, the betting markets are extremely efficient, and thus provide a good deal of insight.
Today’s Supreme Court decision made it unlikely that Trump’s financial records will become public before Election Day. But that doesn’t seem like enough to account for that large a swing in the odds.
The thing is, gambling is the purest form of capitalism. People setting the lines don’t have an agenda; they care about one thing - making money. The line will be influenced by perception, but effects of that perception is carefully calculated. The betting line on the Chicago Cubs will always be a little biased because they KNOW the Cubs fans are optimistic and there’s a lot of them. The lines are adjusted to account for that.
Not sure what that means for a Presidential election, but I can guarantee that the change wasn’t done on a whim.
Bookmakers draw the line wherever it will encourage people to risk their money. The whole goal is to find that place that makes people step juuuuust over the line of what they would have told you was their comfort zone.
Here’s the last four weeks of my prediction market (PredictIt) tracker with favorite-longshot debiasing. Just some normal wiggling about. Nothing to be too concerned about.
A line of -180 means you would have to bet $180 to win $100, while a line of +160 means you can bet $100 to win $160. A large negative line implies a heavy favorite (loosely speaking).
You shouldn’t be gambling! You’re only five years old!
Alright, if there’s a negative number it means that “team” is the favorite. If you bet on Biden and the line is -155 , you collect $100 if Biden wins and you pay $155 if Biden loses.
A positive number means that team is the underdog. If you bet on Trump and the line is +130, you collect $130 if Trump wins and you pay $100 if Trump loses.
I know several people who would never have voted for President Trump before the increase in anarchy and explicit racial identity politics. Now they want to buy guns and vote for the orange one.
However, it may be helpful to look at the probabilities of winning for each candidate implied by those lines.
-180 means the player must bet 180 to win 100. This implies the probability of Biden winning is P(B) = 180 / (100 + 180).
+160 means the player must bet 100 to win 160. This implies the probability of Biden winning is 100 / (100 + 160).
In both cases the numerator is the the amount of the player’s wager and the denominator is the wager plus how much the player will win if, in fact, the player wins.
This difference is the overround and it’s how the bookmaker avoids risk. But we are not avoiding risk so we can scale down the implied probabilities so that they sum to 1.
Finally, we can also look at the second case (Biden -155, Trump 130) to see…
P’(B) ~= 0.583
P’(T) ~= 0.417
So all told Biden dropped by about 4% and Trump rose by 4% according to this one bookmaker. All told that’s not a huge shift, but it might be something to watch should the trend continue.
This concludes the lecture entitled: The Mathematics of Making Book for the Precocious Five-year-old.
Anybody who thinks in terms of “the increase in anarchy and explicit racial identity politics” voted for Trump in 2016 and has been voting Republican in every election since 1972.
I think you mean The Slow Five-Year Old. The calculations went right over my head, but I understood the conclusion. And I enjoyed the lecture very much. Thank you.
All this talk from some people of Biden winning in a blowout is dumb. The last blowout was in 84 when Reagan was a very popular incumbent and the economy was good and getting better. Same with Nixon in 72 before all the Watergate stuff came out. Both of them won 49 states. 1980 was a blowout with the economy in bad shape so the incumbent lost, Carter only won 6 states.
