Prediction Markets and the French Elections [UPDATE]

Okay, so the race is over, here are the results, taken from TF1, the forecasts of the FTD prediction market and the last Ipsos poll (absolute deviation in brackets):

	Official Result	FTD forecast	Ipsos
Nicolas Sarkozy	31.18	32.00 (0.82)	30.0 (1.18)
Ségolène Royal	25.87	26.36 (0.49)	23.5 (2.37)
François Bayrou	18.57	18.10 (0.47)	17.0 (1.57)
Jean-Marie Le Pen	10.44	14.00 (3.56)	13.5 (3.06)
Others	13.94	9.54 (4.4)	16.0 (2.06)
Root MSE		2.58	2.15

Thus overall performance is quite good, but the high turnout apparently came unexpected and Le Pen's share was overestimated. If i find the time, I will collect the last pre-election survey results for comparison...

UPDATE: Ipsos performed better in terms of MSE, however the accuracy for the two top candidates and Bayrou remains impressive.

My own portfolio performed ok (winning 3%). Some time before the market closed I sold Sarko at 32, and Sego at 27 assuming both to be overvalued (that was close...). I overestimated Le Pen, but that wasn't too costly. However I expected a little more of Bayrou... , didn't lose money, though (bought quite a lot at 17.73, real share: 18.57).

Prediction Markets and the French Elections

France and Europe are tautly waiting for the results of the first round of the French presidential elections. Last surveys see Sarkozy and Royal head-to-head - and in the second round. However with 40 percent undecideds, anything remains possible. With the polls closing at 20:00, we will see whether there will be a surprise candidate making it to the second round - like right-wing Le Pen last time. My personal guess is that the centrist Bayrou has indeed some chances of kicking Royal out. But that might also be wishful thinking.

Not only pre-election polls try to give us an idea of the results. There are also prediction markets like the Iowa Electronic Market that tried to exploit the "wisdom of crowds". While the IEM does not have a French presidential election market, the German edition of the Financial Times does. The "strategists stock market" can be found here. Last trades (expected percentages) are as follows:

• Nicolas Sarkozy............... 32,00
• Segolene Royal................ 26,36
• Francois Bayrou............... 18,10
• Jean-Marie Le Pen............ 14,00
• Others.......................... 10,00

It will be interesting to see how it performs compared to classical polls. At Germany's last general election in 2005, although being far from accurate, the "Wahlbörse" prediction market run by the weekly DIE ZEIT outperformed the research institutes. More on this can be found in the article "The predictive quality of political stock exchanges and polls" by Lena-Maria Schaffer, who is now a PhD student at ETH Zurich.

Both The Economist and TIME magazine had nice pieces on the use and usefulness of prediction markets a while ago. They can be found here: The Economist "Information markets", or (no login required): here. TIME asks The End Of Management? (or here).
As a good starting point to learn more, you can read some of the (NBER) papers by Justin Wolfers at UPenn and Eric Zitzewitz of Stanford.

Now I gotta go back to my portfolio and see how my 2120 undervalued Bayrou shares perform...

Bomb, bomb, bomb, bomb bomb Iran...

Republican presidential candidate, Senator John McCain's re-interpretation of the Beach Boys:



Generally I would support the notion that it is acceptable to make fun of almost anything. However, if you are running for this kind of office, you should be a little more careful about your jokes. The tensions between the West and Iran are mounting continuously so that - in the end - if elected, McCain might end up having to make his joke happen. Wouldn't be so funny then, huh?

Virgina Tech University

No need to comment on the event itself, but watch this piece from "The West Wing":



President Bartlet's speech from "20 hours in America". Maybe a little to much pathos, but seeing a tragedy like this at a university, a place of youth and learning and freedom well justifies some pathos...

been there, seen that... [somewhat offtopic]

SPIEGEL online, the online spinoff of the political magazine DER SPIEGEL and one of the fastest and most read german-language news portals published an article on Thailand's Chumphon region today. I agree with almost everything they wrote, this is one of the "undiscovered diamonds" in Thailand:

Die Strände Thailands scheinen mancherorts endlos zu sein. Am Golf von Thailand zwischen Hua Hin und Chumphon kann ein Urlauber lange am Wasser laufen, bevor er ein Dorf oder gar einen anderen Touristen sieht. Weiter südlich bei Surat Thani, Nakhon Si Thammarath und Songkhla haben Besucher ebenfalls viel Platz. Die Infrastruktur für Reisende ist überall gut: Ein schöner Strand, ein sauberes Zimmer, preiswerte Busse, Bahnen, Fähren und Restaurants, dazu exotische Märkte und freundliche Menschen. more

This was one of the most intriguing experiences there: Traveling in a country that welcomes 13.8 million vistors a year usually means never being "alone" at a place, whatever remote. The province of Chumphon (Chumporn being definitely the funnier transcription, but it loses at google: 162,000 versus 684,000) marks an exception: although easily accesible by train from Bangkok, you can find yourself walking endless sand beaches completely alone, maybe with some fishermen's kids playing in the water. Being the only foreigner makes you an attraction and you can experience by yourself what earlier visitors of Thailand meant when writing about the Thai's legendary hospitality and friendliness...

Blogging in political science

Dan Drezner, one of the most prominent bloggers in the political science corner of the blogosphere was asked to write a discussion paper for APSA on academic blogging in political science. A sneak preview can be found... of course here, in his blog. He discusses chances and downsides of blogging in academia and provides 10 pieces of advice to blogging newbies like me.