Conducting polls to forecast election outcomes has been an inexact process for decades, often leading to widely erroneous conclusions. But the recent introduction of our IBKR Forecast Trader and its success in confidently predicting the past presidential election and congressional composition underscores the importance of assessing probabilities as depicted by our predictive market. Consider election day just a week ago. Broadly speaking, polls expected Vice President Kamala Harris to pull off a narrow victory, but the IBKR Forecast Trader platform accurately pointed to Trump capturing the White House with a commanding margin. Additionally, our odds also correctly anticipated GOP majorities in both the House and Senate. The discrepancy is compelling and demands further analysis during future elections.
Polls Depicted a Closer Race
While many polls are based on the popular vote, the electoral college is what propels candidates to the White House. Both measures, however, fell short of calling a winner correctly. Polling service 538 is an example. It uses data from a variety of organizations to run 1,000 scenarios based on variations such as which candidate may win each state. It then estimates the electoral ballots that each contender will capture and the chances of each contestant becoming the next president. According to 538, Harris had her largest lead on September 18, with a forecast that she would secure 300 electoral votes compared to Trump’s 238. The 538 gap gradually narrowed but continued to show her leading on October 11 with 275 electoral votes compared to Trump with 263. 538 also reported that Trump had only a 47% chance of claiming the White House. Conversely, the IBKR Forecast Trader contract asking, “Will Donald Trump win the US Presidential Election in 2024?” had a different conclusion. It showed Trump with a 51% chance of success.
As time passed, IBKR Forecast Trader continued to show Trump’s chance of winning improving and by election day, the platform depicted a 59% likelihood of him returning to the Oval Office. On the same day, 538 predicted that Harris would win with 270 votes, two more than Trump. However, he ended up sweeping all seven swing states and capturing 312 electoral votes compared to the 226 secured by Harris.
Polling results for popular voting were also inaccurate. On August 5, for example, polls showed Kamala Harris and Donald Trump nearly tied among registered and likely voters with the candidates expected to capture 47.0% and 46.8% of ballots, respectively, according to Statista. The gap eventually narrowed and on the night before election day, polls showed the candidates in a virtual tie for the popular vote at 48.5% and 48.4%, respectively. As mentioned above, however, the former president captured 50.3% of ballots, outpacing Harris, who captured 48.1%.
Dollars or Voices?
A critical consideration going forward is whether dollars invested or questions answered yield better results when attempting to track political probabilities. While the election that just passed is just one sample, the discrepancies related to polling surveys and actual outcomes have been around for a while. Our IBKR Forecast Trader strives to quantify the feelings and sentiments of the public via dollars on Yes and No contracts, attempting to get closer to reality. Think about it: Do people have more to lose when they invest in a Yes or a No contract, or when they’re answering a survey on one candidate or another? The incentive to reflect how folks really feel is much stronger when their personal finances are involved and privacy is protected. But during a voluntary survey, individuals may feel ashamed of speaking their opinions, or they may have woken up on the wrong side of the bed and don’t have as direct of an interest in answering truthfully.
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