Why are the Tories favourites?

toryfav

Exactly one month ago, the Ladbrokes betting suggested the race to be the biggest party after the election was an exact coin toss, with both the Tories and Labour quoted at 10/11. Now, the Tories are pretty strong favourites; the odds imply there is a 58% chance they will come out with most seats.

What’s changed? Well, not the polls; the averages have been very consistent for about five months now. It’s very close, although Labour leads continue to be more common. Here is the tracker provided by the excellent May2015 site.

polls

The political science models have moved towards Labour in recent weeks. That’s because they build in an expectation that the polls will drift towards the Conservatives in the weeks leading up to election day. That doesn’t seem to be happening yet, and the clock is ticking down, hence Labour’s slim advantage has more chance of holding. The Tories probably need to have around a 2% national vote share lead on polling day to win most seats.

Given all of that, the moves in the betting markets don’t seem to make a lot of sense. I think it’s a result of more and more people actually starting to think about the election the nearer we get, and a very large number of those people believing that Ed Miliband is too much of an electoral liability to become PM, irrespective of what the polls say.

2 thoughts on “Why are the Tories favourites?

  1. Not sure how persuasive this explanation is. It requires people who bet to pick up that large numbers other people will take an aversion to Miliband, but not just yet. Empirically this is a hypothesis that is impossible to prove or disprove, yet.

    The alternative hypothesis is that this is like betting on the Grand National where most people look at the form book to identify the favourite but a small number of people know that the favourite is lame. The difference between horses and politicians is that someone would spot the horse is lame and publicise it, but if there was a police investigation into a political party, thousands might know but media very limited in reporting it.

    Where a resilient gap opens up between apparent public information and market, one hypothesis has to be that it might be due to asymmetric Information.

    All the happy punters being egged on to bet Lab as largest party on exchanges due to the polls should at least reflect on the possibility that the mug in their transaction is not the person on the other end.

    • Can’t argue with any of that, although I have a small advantage in knowing who is placing these bets and sometimes even talking to them about it. Admittedly, my theory is guesswork and isn’t very likely to be the whole explanation, but I’m pretty sure it is a factor.

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