The Referendum Vote

By Stuart 'Redarmi' Doyle

 One of the themes running through most of the tips here at Betting Emporium is that we look for ways in which the odds compilers or public that shape the betting line may have systematic biases that can provide us with an edge when we are betting and when looking at the prices for elections there is one bias that always stands out to me and that is what is known as the “favourite-longshot bias”. The basic premise is that in many betting markets (especially those with limited information) the odds compilers will put in the longshots at too short a price and eliminate a lot of the margin they have on the favourites. The general thinking as to why this happens is that putting in a 10/1 shot at 20/1 and seeing a lot of money for it is a fast route to the dole queue for an odds compiler when it wins where as if you put in a 1/3 chance at 2/5 or 4/11 nobody will really notice so it is in the compilers interest to err on the side of caution with the bigger prices.

All of this came to my mind as I was looking at the latest polling data and prices for Thursdays referendum vote in Scotland. The market that I am most interested in is what percentage of the vote will “yes” get. Most current polls have this in the 47-48% region and the polling companies work on the basis of a margin for error of +/- 3% which suggests that 45-50% which is a 13/8 favourite with Ladbrokes is the correct favourite but my attention was drawn to some of the bigger priced options. Under 30% is a 33/1 shot with 30-35% a 25/1 shot. In a market where they are betting to 118% then 7% is taken out by two options that literally have no chance. When we are betting on sport we often talk about everything having a price and needing to assign a probability to everything and I suppose there is a theoretical chance that the yes vote could be under 35% but it would mean that either huge amounts of people that the pollsters are talking to are lying or something absolutely catastrophic happens between now and Thursday to change a vast portion of the electorates mind. Realistically there is more chance of going to the bottom of your garden and finding fairies riding a fit Shergar than there is of a less than 35% Yes vote. The other options are all within the realms of possibility but I still think that some of the more extreme options are underpriced. One of the slight concerns when betting on this is that whilst polling companies have worked very hard since their disastrous showing in the 1992 general election to eliminate biases in what people tell them they don’t have a lot of experience of polling on this subject so there is a chance that there may be a bias in what people tell them that they haven’t been able to pick up. To try and get an idea of what that bias may be I looked at polls on devolution and independence from around the world including those in Scotland previously. It does seem that generally if a bias exists it tends to be towards retaining the status quo (in this case a no vote). A decent case being that of Quebec in 1995 where the final polls showed a small majority for yes but the ultimate vote was in favour of no. This is in line with regular election polling where the status quo party (or more conservative, with a small c, option) often gets a slightly better result than polls suggest. Taking all of this into consideration the 5/1 on 55%+ vote for the yes campaign seems to be a bit skinny. When looking at this price I think we also need to consider where the money is likely to go. The more emotional money is likely to be on yes and yes by a large majority because of the strength of feeling and nationalism. It’s a bit like the reason the England football team get overbet to win the world cup. My gut feeling is that 55%+ yes should be a true 20/1 shot and maybe even bigger. For all of the same reasons that feels about the right price for the 35-40% band too. 40-45% seems to be priced about right to me at 5/2 and whilst I don’t feel as though it is massively wrong overall momentum still seems to be with the yes campaign and I wouldn’t be too interested in that band unless I could get 10/3+. That leaves us with two options. 50-55% and 45-50% and I think at best prices they both represent a touch of value and the way that I have bet it is to have a big bet on 45-50% at 13/8 and a saver on 50-55%. My estimations for their chances were 11/10 45-50% and 7/2-4/1 for 50-55%.

Recommend 16 Points Yes 45-50% @ 13/8 (Ladbrokes) and 5 points Yes 50-55% @ 4/1+ (Ladbrokes, better available on Betfair as I type)

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