Friday, September 19, 2008

Obama Intrade


The raw data show the Palin Effect in the dramatic turn around in the futures prices with McCain trailing for many months and Obama leading. In early September there is a sudden reversal. Politics, like life, is dominated by extreme events which only a heavy tailed distribution can capture. None of the other election models are capable of capturing these extreme events. They are far too static and tame. The polls only partly capture the Palin Effect. It is real and dramatic.

Bob calculates the probabilities of winning for both candidates using the stable model of the trading returns. This projects the returns forward based on the number of days remaining and the dynamics of the movements.

His calculations give these probabilities:

Data scaled by 53 days. Last data point on Fri 12 Sep 2008.

Probability of McCain win in November 0.760798

Probability of Obama win in November 0.370827

Using only the last 90 days, the probabilities are:

Probability of McCain win in November 0.930025

Probability of Obama win in November 0.263054

Sarah Palin is a Black Swan (to use a phrase made popular by Nassim Taleb’s best-selling book The Black Swan). The Palin Effect is a rare event of low probability but consequential magnitude that falsifies a theory. More than all the commentary in the media, this graph dramatically shows the Palin Effect. She has completely reversed the fortunes of the candidates. (More Arthur De Vany)


Anonymous said...

The Palin pick was a good one but I don't believe for a second it was she who will be responsible for pulling McCain up in the polls and clinching the election. Obama is a loser and had ZERO chance from the get-go. Once his real opinions and policies came slithering out of his mouth the joke was over. My pet monkey could beat him.

Rodger the Real King of France said...

You know, I agree with you. I've said all along that Obama was unelectable, but I never for a second considered a Mondale type blow-out. Now, because of Palin's coalescing effect on us conservative, and her broad appeal across party lines, I can see it as a possibility.

pdwalker said...

a blowout would be a good thing. watching the democrats self destruct afterwards would be a thing of joy.

Rodger the Real King of France said...

So you'd think. I expected that in 1994 after they last the House for the first time in 40 years, and the Senate. Remember what they did? They acted like they were still running things. And it worked to a large extent, because the media acted like they were running things too. Of course there was no FNC, no You Tube, and no Blogs back then either.

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