In recent days, polls have showed that Barack Obama has drawn even with Hillary Clinton in Iowa and has cut modestly into her lead in New Hampshire. It's important news, to be sure, but his futures prices on the Intrade prediction market have gone up way more than I would have expected.
Here's the lifetime history of the market price for the Democratic nomination contract on Obama (its value can be interpreted as the percent likelihood of him winning):
And here's the price of the contract over the last week:
Have the odds of Obama winning the race actually increased by nine percentage points in the last seven days? It seems disproportionate to the gains that he's made.
Update 12/12 10:13 AM: Maybe I spoke too soon -- the latest New Hampshire poll has Obama and Clinton tied. Wow.
He was underpriced to begin with, as was Romney. Until just a few weeks ago, intrade was too closely aligned with national polling, which isn't the best indicator of who ends up winning the eventual nom. It looks as though intrade traders are now paying more reasonable attention to early state polling than they had been before.
Obama's chances haven't increased 9 points the past few days, intrade just had his chances too low to begin with.
Posted by: Dave | December 11, 2007 at 08:53 PM
I agree with Dave. I don't play the markets, but if I did, I would have made some money and would be cashing out part of my earnings now. Obama was seriously undervalued for a while. I'd probably give him close to 40% now, but it is at least arguable that he isn't undervalued where he is now.
Posted by: ikl | December 13, 2007 at 12:38 AM