As doubts have grown over the accuracy of polling, many have argued that there’s a better gauge for predicting electoral outcomes: betting markets. The idea is that the wisdom of crowds—especially when those crowds are putting their money where their mouths are—trumps surveys that are hobbled by unanswered phones, unreliable samples, and people afraid to admit to another live human (or even a robot) that they just might vote for Donald J. Trump for president.
And yet there’s increasing reason to doubt the prognostications of punters. They were notably wrong on the aforementioned Trump. Even has he topped poll after poll of GOP voters, bettors gave Trump a less than 50 percent chance of winning the GOP nomination back in February. As for Brexit, even though public polling showed a very tight race, bettors “priced an 85 percent likelihood that Britain would stay in the EU,” reported the Economist.
The latest blow to the unimpeachable wisdom of market forces comes from Colombia. While there appears to have been no betting on the specific outcome of the referendum on the peace deal between the Colombian government and the FARC rebels, the country’s stock market rallied after the provisional agreement was agreed between the two sides. And now that the deal has been narrowly rejected, the Colombian peso and the country’s stock market are in a swoon. That strongly suggests that a “yes” vote was priced in.
All in all, participants in markets presumably suffer from the same kind of Pauline Kaelism as the rest of us. Few bettors knew Trump supporters, perhaps, so they couldn’t fathom a world in which he would win the nomination of a major party. I wouldn’t say that Jill Stein, priced as a 500 to 1 shot at becoming the president is a good bet per se, but the speculators have been wrong before—and they’ll likely be wrong again before too long.
