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Competing Approaches to Forecasting Elections: Economic Models, Opinion Polling and Prediction Markets

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  • Andrew Leigh
  • Justin Wolfers

Abstract

We review the efficacy of three approaches to forecasting elections: econometric models that project outcomes on the basis of the state of the economy; public opinion polls; and election betting (prediction markets). We assess the efficacy of each in light of the 2004 Australian election. This election is particularly interesting both because of innovations in each forecasting technology, and also because the increased majority achieved by the Coalition surprised most pundits. While the evidence for economic voting has historically been weak for Australia, the 2004 election suggests an increasingly important role for these models. The performance of polls was quite uneven, and predictions both across pollsters, and through time, vary too much to be particularly useful. Betting markets provide an interesting contrast, and a slew of data from various betting agencies suggests a more reasonable degree of volatility, and useful forecasting performance both throughout the election cycle and across individual electorates.

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Bibliographic Info

Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 502.

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Length: 32 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:auu:dpaper:502

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Keywords: Voting; elections; prediction markets; opinion polling; macroeconomic voting;

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References

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  1. Berg, Joyce & Forsythe, Robert & Nelson, Forrest & Rietz, Thomas, 2008. "Results from a Dozen Years of Election Futures Markets Research," Handbook of Experimental Economics Results, Elsevier.
  2. Cameron, Lisa & Crosby, Mark, 2000. "It's the Economy Stupid: Macroeconomics and Federal Elections in Australia," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 354-64, December.
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Blog mentions

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  1. Justin Wolfers profile in The American
    by Don Arthur in Club Troppo on 2007-05-27 08:42:10
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Cited by:
  1. Jeffrey S. DeSimone & Courtney LaFountain, 2007. "Still the Economy, Stupid: Economic Voting in the 2004 Presidential Election," NBER Working Papers 13549, National Bureau of Economic Research, Inc.
  2. Andrew Leigh, 2008. "Bringing home the bacon: an empirical analysis of the extent and effects of pork-barreling in Australian politics," Public Choice, Springer, vol. 137(1), pages 279-299, October.
  3. Ray Fair & Cowles Discussion & Yale Working, 2006. "Interpreting the Predictive Uncertainty of Elections," Yale School of Management Working Papers amz2643, Yale School of Management, revised 01 Aug 2007.
  4. Hardouvelis, Gikas A & Thomakos, Dimitrios D, 2008. "Consumer Confidence and Elections," CEPR Discussion Papers 6701, C.E.P.R. Discussion Papers.
  5. Andrew Leigh, 2009. "Does the World Economy Swing National Elections?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(2), pages 163-181, 04.
  6. Alex Ferreira & Sérgio Naruhiko Sakurai, 2009. "Personal Charisma or the Economy? Macroeconomic Indicators of Presidential Approval Ratings in Brazil," Working Papers 09_09, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
  7. Sjöberg, Lennart, 2006. "Are all crowds equally wise? A comparison of political election forecasts by experts and the public," Working Paper Series in Business Administration 2006:9, Stockholm School of Economics, revised 04 Oct 2006.
  8. Phillip Metaxas & Andrew Leigh, 2013. "The Predictive Power of Political Pundits: Prescient or Pitiful?," CESifo Working Paper Series 4261, CESifo Group Munich.

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