Tuesday’s election results will be watched eagerly, not only at party headquarters. Traders on the Sauder School of Business Prediction Markets have tried to predict the B.C. election outcome – and have put their money behind those predictions. Some are about to make a bit of money, and others will lose a bit of money. Traders will be keeping an eye on their portfolios as the results stream in.
As a method of crowdsourcing, prediction markets can be quite effective in aggregating news from different sources. When real money is at stake, prediction-market participants have a strong incentive to get the prediction right.
So what do traders predict? Right from the beginning, the NDP was favoured to win a majority government. The probability of this outcome has hovered around 90 per cent throughout the election campaign. While the gap between the B.C. Liberals and the NDP has narrowed substantially in the popular vote prediction, the NDP’s lead is sufficiently large that Adrian Dix can look forward to a very comfortable majority in the legislature. Our traders predict the NDP to win 51 seats, and the B.C. Liberals 31 seats.
Support for the NDP is more evenly spread throughout the province than it is for the B.C. Liberals. Our first-past-the-post electoral system works in such a way that even a diminished gap in the popular vote will allow the NDP to win significantly more seats in the legislature than the B.C. Liberals.
Whether Greens, Conservatives, or independents will gain any seats remains an open question. The market predicts that the Green Party may win one seat (likely on Vancouver Island), while the Conservatives are expected to win no seats at all. One or two independents are also expected to win seats. Support for the Green Party has held remarkably steady despite overtures to its base from both major parties.
The comeback of the B.C. Liberals is perhaps the most surprising story of the election campaign. If the prediction market is correct, the regained momentum will be too little too late for Christy Clark. It is a rare feat to regain that much traction with voters that late in a campaign. Alberta’s Alison Redford managed a late-stage comeback a year ago – one that was ultimately successful. If the Liberals lose Tuesday night as traders expect, they will start rebuilding from a more solid base than they could have hoped for even a month ago.
The counterpart to the Liberals’ ascent is the B.C. Conservatives’ steep descent. The erosion of support for the Conservatives became even more evident after the leaders’ debate. The debate may not have delivered a clear winner, but it may have scuttled John Cummins’s aspirations. The self-inflicted wound of having to drop four candidates probably sealed the party’s fate.
Some traders will have reason to celebrate Tuesday night regardless of whether their preferred candidate or party gets elected. By predicting the election outcome correctly, they stand to gain a decent return on their investment.
Werner Antweiler is professor of economics at UBC and director of the Sauder School of Business Prediction Markets.Report Typo/Error
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