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OT: Estimating win probability from multiple bookmakers' odds

Posted By: Taper_Mike
Date: Saturday, 3 November 2012, at 6:27 a.m.

In Response To: OT: Estimating win probability from multiple bookmakers' odds (leobueno)

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I’ve been following these odds for a couple of weeks now. I think that they are a better predictor than most of the polls I’ve been hearing. Corporate newscasters have a vested interest in making the “horse race” seem close. Otherwise, why would viewers stay glued to a channel, watching news and ads all day long?

On Oct. 24, Obama was the favorite, with odds around 1-to-2. That means you had to risk 2 in order to win 1. On the same day, the odds on a Romey wager were something like 5-to-2. You were risking 2 in order to win 5.

By Oct. 31, the line had shifted to somewhere above 1-to-3 for a bet on Obama to win. Today, it is above 1-to-4.

The bookies work to “balance their book.” One way to do this is to adjust odds so as to attract bets on one side or the other. For that reason, I would use the median odds in your calculation.

Mike

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