IDEAS home Printed from https://ideas.repec.org/a/buc/jpredm/v4y2010i2p45-64.html

Consistency in the US Congressional Popular Opinion Polls and Prediction Markets

Author

Listed:
  • Elliot Tonkes
  • Dharma Lesmono

Abstract

Prediction and betting markets have evolved with contracts based on electoral outcomes and the traded prices provide a measure of speculators' views on electoral outcomes. Conversely, popular opinion polls yield data which provide statistics on the public's declared voting intentions. This article formulates a model to describe the stochastic evolution of opinion polls, and the resultant probability distribution of seats won in the US House of Congress. Based on standard methods from financial option pricing theory, we can then determine the theoretical value of observed contracts in the prediction markets. Our results show that qualitative predictions are obeyed, but there exist significant deviations between the actual prices traded in the Iowa Electronic Market (IEM) and our theoretical valuation under real-world expectations. Some explanations are provided, which are consistent with conclusions drawn by other authors who have studied electoral prediction markets.

Suggested Citation

  • Elliot Tonkes & Dharma Lesmono, 2010. "Consistency in the US Congressional Popular Opinion Polls and Prediction Markets," Journal of Prediction Markets, University of Buckingham Press, vol. 4(2), pages 45-64, September.
    • Handle: RePEc:buc:jpredm:v:4:y:2010:i:2:p:45-64
    as

    Download full text from publisher

    File URL: http://www.ingentaconnect.com/content/ubpl/jpm/2010/00000004/00000002/art00004
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eisinga, Rob & Franses, Philip Hans & Ooms, Marius, 1999. "Forecasting long memory left-right political orientations," International Journal of Forecasting, Elsevier, vol. 15(2), pages 185-199, April.
    2. Lionel Page, 2008. "Comparing Prediction Market Prices and Opinion Polls in Political Elections," Journal of Prediction Markets, University of Buckingham Press, vol. 2(1), pages 91-97, May.
    3. Brown, Lloyd B. & Chappell Jr., Henry W., 1999. "Forecasting presidential elections using history and polls," International Journal of Forecasting, Elsevier, vol. 15(2), pages 127-135, April.
    4. Holbrook, Thomas M. & DeSart, Jay A., 1999. "Using state polls to forecast presidential election outcomes in the American states," International Journal of Forecasting, Elsevier, vol. 15(2), pages 137-142, April.
    5. Smith, Alastair, 2003. "Election Timing in Majoritarian Parliaments," British Journal of Political Science, Cambridge University Press, vol. 33(3), pages 397-418, July.
    6. Ito, Takatoshi, 1990. "The timing of elections and political business cycles in Japan," Journal of Asian Economics, Elsevier, vol. 1(1), pages 135-156.
    7. Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 127-141, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lesmono, Dharma & Tonkes, Elliot & Burrage, Kevin, 2009. "Opportunistic timing and manipulation in Australian Federal Elections," European Journal of Operational Research, Elsevier, vol. 192(2), pages 677-691, January.
    2. J. Stephen Ferris & Derek E. H. Olmstead, 2012. "Fixed versus Flexible Election Cycles: Explaining innovation in the timing of Canada’s Election Cycle," Carleton Economic Papers 12-04, Carleton University, Department of Economics, revised 01 Dec 2016.
    3. A. Kamakura, Wagner & Afonso Mazzon, Jose & De Bruyn, Arnaud, 2006. "Modeling voter choice to predict the final outcome of two-stage elections," International Journal of Forecasting, Elsevier, vol. 22(4), pages 689-706.
    4. Marcelin, Isaac & Stephen, Sheryl-Ann K. & Fanta, Fassil & Tecklezion, Mussie, 2019. "Political regimes, investment and electoral uncertainty," Research in International Business and Finance, Elsevier, vol. 47(C), pages 580-599.
    5. J. Stephen Ferris & Marcel-Cristian Voia, 2011. "Does the expectation or realization of a federal election precipitate Canadian output growth?," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 107-132, February.
    6. Souren Soumbatiants & Henry Chappell & Eric Johnson, 2006. "Using state polls to forecast U.S. Presidential election outcomes," Public Choice, Springer, vol. 127(1), pages 207-223, April.
    7. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    8. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    9. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    10. Schadner, Wolfgang, 2022. "U.S. Politics from a multifractal perspective," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).
    11. Dai, Min & Jia, Yanwei & Kou, Steven, 2021. "The wisdom of the crowd and prediction markets," Journal of Econometrics, Elsevier, vol. 222(1), pages 561-578.
    12. Funashima, Yoshito, 2016. "The Fed-induced political business cycle: Empirical evidence from a time–frequency view," Economic Modelling, Elsevier, vol. 54(C), pages 402-411.
    13. Antoinette Schoar & Ebonya L. Washington, 2011. "Are the Seeds of Bad Governance Sown in Good Times?," NBER Working Papers 17061, National Bureau of Economic Research, Inc.
    14. Spyros Galanis & Christos A Ioannou & Stelios Kotronis, 2024. "Information Aggregation Under Ambiguity: Theory and Experimental Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(6), pages 3423-3467.
    15. Almond, Douglas & Du, Xinming, 2020. "Later bedtimes predict President Trump’s performance," Economics Letters, Elsevier, vol. 197(C).
    16. Justin Wolfers & Eric Zitzewitz, 2006. "Prediction Markets in Theory and Practice," NBER Working Papers 12083, National Bureau of Economic Research, Inc.
    17. Alberto Alesina & Gerald D. Cohen & Nouriel Roubini, 1992. "Macroeconomic Policy And Elections In Oecd Democracies," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 1-30, March.
    18. Kwok Ping Tsang & Zichao Yang, 2026. "Political Shocks and Price Discovery in Prediction Markets: Evidence from the 2024 U.S. Presidential Election," Papers 2603.03152, arXiv.org, revised Mar 2026.
    19. Akhmedov Akhmed, 2006. "Human Capital and Political Business Cycles," EERC Working Paper Series 06-02e, EERC Research Network, Russia and CIS.
    20. Kang, Seungwoo & Oh, Hee-Seok, 2024. "Forecasting South Korea’s presidential election via multiparty dynamic Bayesian modeling," International Journal of Forecasting, Elsevier, vol. 40(1), pages 124-141.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:buc:jpredm:v:4:y:2010:i:2:p:45-64. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dominic Cortis, University of Malta (email available below). General contact details of provider: http://www.ubpl.co.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.