Politics / Leighton Vaughan Williams / 17 November 2008 / Leave a comment

The Betfair Prof tells us how Betfair got the U.S. Presidential Election right over four hours ahead of the media. How? Read on...

California put Barack Obama over the top at 4am UK time, though the final death knell on the McCain campaign was effectively sounded at about 2.30am when Ohio was called for the Democrat. Over at Fox News, Republican strategist and former Bush campaign manager, Karl Rove, was still waxing lyrical as to McCain's path to victory through Ohio when the news was broken to him. He meandered to an alternative route through California and Oregon but at that moment his eyes and those of the conservative Fox team told it all. It was over.

For those who followed the Betfair markets rather than Fox, however, the story was over nearly three hours earlier. The market when polls closed had McCain the marginal favourite in Indiana, a state Bush had won over Kerry by comfortable double-digits. It was the first state to close its polls, at 11.30pm UK time, and was 'too close to call' according to the exit polls.

The problem with exit polls is that they have a very poor track record in American elections, effectively calling the 2004 race for John Kerry via wins in Ohio and Florida. In the event, he lost both, and the election with them. The exit polls (although not the polls in general) also significantly over-estimated Obama's performance in the Democratic primaries against Hillary Clinton.

So it was significant when by 11.45pm Obama for the first time turned a shade of odds on in Indiana, with traders starting to back him to win the state at less than evens for more than modest sums. By this time CNN was calling just 1% of the precincts in the Hoosier State.

What was going on to shift the money so determinedly in the Democratic direction? Basically, it was the following numbers:

Stueben: Kerry 34%, Obama 42%

DeKalb: Kerry 31%, Obama 38%

Knox: Kerry 36%, Obama 54%

Marshall: Kerry 31%, Obama 50%

Steuben, DeKalb, Knox and Marshall were the early-reporting Indiana precincts, and all of them showed a big swing to the Democratic nominee since 2004. This trend was followed up in spades when the results, several minutes later, started to come in from Vigo County courtesy of election blogger and polling guru, Nate Silver of www.fivethirtyeight.com.

"Donnie Fowler, who is on HDNet with me and knows Indiana like the back of his hand," he wrote, "thinks Obama's strong performance in Vigo County is a good sign for him". Closer observation of the numbers showed that Silver was in fact employing a very English form of understatement. By 12.20am, Obama was trading at shorter than [1.5] on Betfair, in a state which he had to win only if he wanted a landslide. Meanwhile, the bare numbers showed the Indiana election on a knife-edge and the pundits at Fox News were consoling themselves with the idea that Indiana was over-polling for Obama just because it shares a border with his home state of Illinois! Just wait until we see the results from states that don't share a border with Illinois, they declared enthusiastically.

Well, we did and the rest is history. At Fox, that history was written at 4am. At Betfair, it was written before the clock had even struck midnight.