Fall 2005 Seminar Series

DATE: Thursday, October 27, 2005
LOCATION: E40-298
TIME: 4:15pm
Reception immediately following in the Philip M. Morse Reading Room, E40-106

SPEAKER:
Edward H. Kaplan
William N. & Marie A. Beach Professor of Management Sciences
School of Management
Yale

TITLE
Polls, Prices, and Predicting the Presidential Election

ABSTRACT
Along with the usual public opinion polls, the 2004 presidential election featured an active prediction market at Intrade.com where securities addressing many different election-related outcomes were traded. We develop alternative models for these security prices with special focus on the electoral college rules that govern US presidential elections, see which models are more (or less) consistent with the data, and compare their predictions to models based on opinion polls. A simple model that assumes state-by-state election outcomes are strongly dependent (but in a highly structured manner) replicates both the security price on the presidential win contract observed in the runup to the election, and the actual state-by-state outcomes in the election itself.

 

Joint work with Keith Chen, Jon Ingersoll and Ray Fair