DID THE BETTING AT BOOKIES PREDICT BREXIT? The vote in favor of Brexit created a crisis because it was a surprise. The financial markets had priced in the opposite result. This Bloomberg article by Robert Dutton from June 21—before the election—said: “Investors are piling money into bets on a victory for the “Remain” campaign, led by Prime Minister David Cameron. The pound has surged to a five-month high against the dollar and global stocks gained for a fourth day on Wednesday….”

Betting on elections is legal in Britain, and the odds at betting shops make up a prediction market. What the odds showed was complicated. Here is a Zero Hedge post by Tyler Durden on June 22—-before the election. He reported that the head of political betting at Ladbrokes estimated that, based on the betting, the chances of a vote to stay in the European Union winning were 76%. The director noted an anomaly, however: “Although Ladbrokes has received a higher volume of bets to leave the EU, those making a punt on remain were placing higher financially larger. Shaddick revealed the average stake on a bet to remain was £450, compared to £75 on a bet to leave.”

The number of bettors on each side of the bet seems to have been a more important signal than the money wagered on each side.

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