Models, markets, polls and pundits: a case study of information efficiency

doi:10.1017/CBO9780511493614.008

7 - Models, markets, polls and pundits: a case study of information efficiency

Published online by Cambridge University Press: 09 July 2009

Leighton Vaughan Williams

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Leighton Vaughan Williams

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Leighton Vaughan Williams: Affiliation:
Professor of Economics and Finance Nottingham Business School Nottingham Trent University
Leighton Vaughan Williams: Affiliation:
Nottingham Trent University

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Summary

In this chapter, I will offer a brief perspective on alternative methodologies designed to gauge the state of the 2004 US Presidential election race at a given point in time and to forecast the outcome of the race. At the time of final data collection and completion (Tuesday, 5 October 2004) the election is four weeks away. The reader can make some judgement of the relative and absolute merits of the alternative methodologies with the advantage of the actual results to hand.

Section 7.1 considers econometric models and section 7.2 considers polling evidence. Section 7.3 considers the forecasts of a panel of ‘experts’. Section 7.4 examines evidence from the various betting markets. Section 7.5 summarises the findings, and concludes.

Econometric studies

The application of economic indicators to forecast election outcomes can be traced to Kramer (1971) and Stigler (1973) for US congressional election, to Fair (1978) and Hibbs (1982) for US Presidential elections and to Lewis-Beck (1988) and Palmer and Whitten (1999) for elections in other industrialised countries.

A survey of economic models for predicting Australian elections (Wolfers and Leigh, 2002) indicates the importance of including unemployment and inflation as key factors in the forecasting mix, with Jackman and Marks (1994) noting an additional incumbency advantage. Jackman (1995) includes a ‘honeymoon’ effect for novice governments and Cameron and Crosby (2000) the impact of the world wars.

Type: Chapter
Information: Information Efficiency in Financial and Betting Markets , pp. 193 - 214

DOI: https://doi.org/10.1017/CBO9780511493614.008 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2005

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