Don't be a sheep following the Trump-betting flock
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DON'T BE A SHEEP FOLLOWING THE TRUMP-BETTING FLOCK
As the U.S. election heat picks up, prediction markets have ramped up their odds of a Donald Trump-Republican victory, which might not paint the most accurate picture of who would finally hold the reins.
"The wisdom of the crowd often beats experts in forecasting accuracy. Still, the crowd needs to be composed of diverse individuals making independent forecasts, but prediction markets may fail to satisfy these conditions," Scotiabank analysts said.
The bank's data reflect a wide margin in current forecasts between expert models and prediction markets.
CASE | BETTING MARKETS ODDS | EXPERT MODELS ODDS |
U.S. Presidency | 59% | 51% |
U.S. House | 50% | 53% |
U.S. Senate | 82% | 72% |
The analysts note that the odds of a Trump win placed by the expert models, which are only at the margin, serve as a better gauge than the prediction markets' bets.
In fact, such bettors might often be influenced by prior bets, which reduces their independence especially in a tight race such as the upcoming one.
Scotiabank's aggregated forecasted results from several expert models reflect a slight Trump advantage, as Vice-President Kamala Harris' poll lead has shrunk especially in the key states of Pennsylvania, Michigan, North Carolina, Wisconsin, Georgia, Arizona, and Nevada.
Meanwhile, a new Reuters/Ipsos poll found Harris held a marginal 46% to 43% lead over Trump.
As financial markets move in tandem with these prediction market bets, as seen with the ongoing charge in Trump trades like the U.S. dollar =USD and bitcoin BTC=, some have flagged risks to such trade setups if the election outcome surprises.
(Ankika Biswas)
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FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:
WALL STREET UNDER PRESSURE AS RATES UPTREND WEIGHS CLICK HERE
BENCHMARK TREASURY YIELD: CAN THE CLIMB CLEAR THE CLOUD? - CLICK HERE
CAUTION! S&P POSITIONING HAS BECOME 'STRETCHED' - CLICK HERE
BETTING ON M&A? HERE'S WHAT TO OWN - CLICK HERE
WEAK START FOR STOXX, TECH CAPS FURTHER LOSSES - CLICK HERE
EUROPEAN BEFORE THE BELL: UNCERTAINTY OFFSETS POSITIVE EARNINGS - CLICK HERE
BONDS AND GOLD BEGIN COUNTDOWN TO US ELECTION DAY - CLICK HERE
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