Since its creation 20 years ago, the University of British Columbia's Sauder School of Business Election Stock Market – since renamed the Prediction Markets – has forecast the outcome of provincial and federal elections with higher accuracy than many public-opinion polls. Its secret? To have participants put their money where their mouths are. As with the real stock market, traders buy shares with real money; in this case, they buy shares based on what they think will happen in a variety of election outcomes.
The Sauder School of Business has partnered with The Globe and Mail during the 2013 B.C. election campaign.
Traders and interested observers can see real-time market data, updated every 15 minutes during each day's trading period, exclusively at tgam.ca/electionmarkets.
As of this writing, traders were paying 35 cents for a B.C. Liberal contract on the popular-vote market, 45.4 cents for a B.C. NDP contract, 12.66 cents for a Green Party contract and 13 cents for a B.C. Conservative contract. The project also includes a majority-government market and a seat-share market.
Sauder School of Business professor Werner Antweiler, who took over as director of the Prediction Markets in 1998, calls the project a forward-looking exercise in crowd sourcing.
Why do you say this is more accurate than many public-opinion polls?
It's asking people, regardless of their own political preferences, who they think is going to win. Participants are made up of mostly people interested in politics; they follow the news very closely and keep an ear on the ground, and in particular with what's happening in the individual constituencies. The market that is of greatest interest is probably the prediction of the seat shares, because the public-opinion polls don't translate their popular-vote-share predictions into how many seats the parties will receive in the legislature.
How many traders do you have?
We're still early going, and it keeps increasing until it gets closer to the election, but as of [Wednesday] evening, I counted 73 registered traders and a total investment amount of $8,049. By comparison, the last B.C. election we covered attracted 104 investors and $23,085 in total. The last federal election we covered (in 2008) attracted 257 traders with a grand total investment of $70,729.
What are the rules?
The market is open to all Canadian residents. They need to be 19 years of age [or older]. The minimum is $25 and the maximum is $1,000. Those are the key parameters. For us, it's really a teaching venture. We try to educate people in the use of the market and how to put in bids.
Why use real money?
There are experts who wrote a string of research papers on this. There is a trade-off: If you use play money, you get people taking sort of radical positions that may not be what they really, truly think what the outcome might be. When you have real money at stake, then people really are trying to put their money where their mouth is, and that means they are much more likely to reveal, truthfully, what they think the outcome is going to be, undeterred by their own political biases.
At the moment, it's showing the likelihood of a B.C. Liberal majority is not great.
It's as long a shot as it gets right now. There's also a possibility of a hung parliament because there might be Independent, Conservative or Green seats. It's more likely that it will be a hung parliament than a Liberal majority, but the traders still predict, overwhelmingly, an NDP majority and the NDP will likely get about 56 seats out of the 85 – a clear majority.
It's interesting that the market is suggesting a seat for the Green party at the moment.
Yes, it [relates to] Andrew Weaver at the University of Victoria, a climate scientist and likely contender. The Green party thinks he has a reasonable chance and, given the portfolio of how the votes went in the past, I think that's not entirely out of the question. I think that's what people are speculating about.
There are a couple of unrelated markets listed as well. Tell me about those.
There are two other markets that we're running. One continuous one is about the Bank of Canada interest-rate announcements and the other one is we're trying to predict the extent of the Arctic sea ice. That has been shrinking very rapidly in the last number of years and climate scientists are speculating how big or small it's going to be.