Polls to probabilities: Comparing prediction markets and opinion polls |
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| Affiliation: | 1. University of Reading and Programme for Economic Modelling (EMoD), Institute for New Economic Thinking at the Oxford Martin School, United Kingdom;2. Nottingham Business School, United Kingdom;1. Università di Roma “Tor Vergata”, Italy;2. ISTAT, Italy;1. Université Laval, Quebec, Canada;2. University of Toronto, Ontario, Canada;3. McMaster University, Canada;1. Institute for Statistics and Econometrics, Christian-Albrechts-University of Kiel, Olshausenstr. 40-60, D-24118 Kiel, Germany;2. Bank of England, Threadneedle Street EC2R 8AH, London, England, United Kingdom;3. DAFM, United Kingdom |
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| Abstract: | The forecasting of election outcomes is a hugely popular activity, and not without reason: the outcomes can have significant economic impacts, for example on stock prices. As such, it is economically important, as well as of academic interest, to determine the forecasting methods that have historically performed best. However, the forecasts are often incompatible, as some are in terms of vote shares while others are probabilistic outcome forecasts. This paper sets out an empirical method for transforming opinion poll vote shares into probabilistic forecasts, and then evaluates the performances of prediction markets and opinion polls. We make comparisons along two dimensions, bias and precision, and find that converted opinion polls perform well in terms of bias, while prediction markets are good for precision. |
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| Keywords: | Forecasting models Information and knowledge Elections Voting behaviour Prediction markets |
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