Wednesday, March 11, 2015

2015 Election Stock Market for the October Federal Election

Werner Antweiler of the Sauder School of Business at UBC runs an election stock market during federal elections in Canada.   On March 1st the market for the fall federal election opened

My holdings as of March 11th
You can invest up to $1,000 in the market and buy and sell shares in how well the political parties will do in the election.   The market is an overall zero sum game.  

The concept behind the election stock market is that if people have to put their money where their mouth is they are likely to make their best estimates of the outcome of the election.  Can markets be used to predict outcomes of events?  With enough people taking part the wisdom of crowds comes into play.

One of the problems with the Sauder School of Business election stock markets is that often there have not been enough people taking part in them making the market not very liquid.   It also meant that one or two people with a few hundred dollars could significantly impact the results of the market.

In 2013 the election stock market did not do any better than most pundits in predicting the results of the BC election    The market predicted an NDP majority and had the popularity of the parties close to what the polls were showing.   In this case I do not think having a lot of traders would have made a dramatic difference to the outcome.    

If predicting the election is of interest to you, I highly recommend taking part in the election stock market.   I have averaged a 30% return over 7 elections - when I factor in 2013 it falls to 20%.

One useful thing that Werner provides is his Seat Distribution Forecaster.   You can enter in your assumptions on what the voters from the 2011 election will do in 2015     You can do the table for the whole nation, parts of the country or individual provinces.   The table reflects the new electoral boundaries in use for 2015
This is the table you enter you assumptions into about how the voters from 2011 will act in 2015
This tool has been available for numerous elections in Canada since the late 1990s.  Currently you can use it for not only the next federal election, but the next election in Alberta and Saskatchewan
This is one scenario I quickly input for BC.  

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