Is the UK in or out?
Bookies have the odds of “remain” at 73%.
A MarketWatch article citing Citigroup claims bookies are “still enthusiastic” over remain prospects.
If someone at Citigropup actually made that statement, that person is totally clueless about how betting odds even work.
Please consider Bookies still deem Brexit unlikely — and for good reason, Citi says by MarketWatch reporter Sara Sjolin.
Recent Brexit polls have pointed to a poor showing for the “remain” campaign, but investors betting on a stay vote shouldn’t throw in the towel quite yet.
Bookies are still enthusiastic the vote on June 23 will come out overwhelmingly in favor of the U.K. staying in the EU — and for good reason, according to research from Citigroup.
Betting Barometer
Source: MarketWatch
Betting Companies Enthusiastic on Remain?
The notion betting companies are confident of something and lay odds based on their confidence is ridiculous. Bookies may or may not be confident, but the reality is they simply do not care.
Betting odds are not determined by the enthusiasm or confidence of bookies. Rather, bookies determine odds based on how people bet. As betting patterns change, so do the odds.
Bookies like to balance their books by adjusting the odds so they make money regardless of the outcome. Bookie confidence is irrelevant.
Heads Bookies Win, Tails Bookies Win
If the books balance, the only thing bookies are confident of is they will make money.
Brexit Betting
Can Betting Odds Predict the EU Referendum Outcome?
Brexit.Bet addresses the question: Can Betting Odds Predict the EU Referendum Outcome?
Opinion polls are the mainstay of election sentiment, but given they were so catastrophically wrong in the 2015 General Election, EU Referendum betting markets are being used as alternative barometer. But how accurate are the EU Referendum betting odds?
As of June 1st the averaged odds from seven leading bookmakers by Brexit.bet implied a 75% chance of the In vote and 25% for the Out.
You can turn the EU Referendum odds into an implied probability – in other words the chance the odds are based on – by doing the simple sum (1/decimal odds)*100 i.e 1/4.0*100 = 25% chance.
Importantly these calculations are based on odds from bookmakers that add a margin, a cost to placing a bet so that they make a profit. If you do the calculation above with advertised odds at say Ladbrokes their current odds are 1.25 and 3.75 . The implied chances are therefore 80% and 27% which equals 107%. The 7% is their margin.
Why should we put faith in betting odds?
The question that anyone unfamiliar with betting will ask is ‘why should we put faith in betting odds?’ This question was answered by Sir Francis Galton back in the early 1900s when he uncovered the Wisdom of the Crowd phenomenon.
Galton was at a livestock fair watching a competition to guess the weight of a butchered ox. No-one guessed the exact weight but Galton calculated the median of guesses as being within 0.8% of the answer, commenting “the middlemost estimate expresses the vox populi, every other estimate being condemned as too low or too high by a majority of the voters.”
Caveats of betting odds as predictors
Though betting markets are very good indicators of underlying probability, they aren’t perfect, and going back to Galton’s experiment we can illustrate why in some circumstances they should be treated with caution.
The accuracy of guesses of the Ox’s weight would be proportional to the number of entrants in the competition. So the number of bets is important, but more so the volume of the money wagered.
Ten £5 bets on OUT are not the same as one £1,000 bet on IN. This can be summed by the phrase ‘Skin in the Game’ which means to incur monetary risk to achieve a goal.
More so, the value of that large bet will be augmented by the perceived experience of the person placing it. If it is an experienced political bettor it has much more weight that a wealthy casual fancying a large punt. Importantly, the volume of bets and the bettors behind them cannot be discerned just by looking at advertised odds, and are only known to bookmaker.
Diversity
In the case of EU Referendum odds, there is no certainty that those betting are drawn from a wide audience representative of the electorate. The behaviour of bettors is not necessarily equal to that of voters, especially as we aren’t sure when people will make up their mind.
Because a Referendum is simply a measure of opinion, rather than something objective, the ‘undecided voters’ have a huge influence. The betting markets cannot know what the waverers may do, so if that group is large enough, the odds could be wrong.
This is exactly what happened in the 2015 UK General Election when a huge number of voters decided on the day, so their intent could not have been factored into the odds. The lack of information of this kind is a crucial drawback in betting markets that are solely measuring sentiment.
Information
The idea of knowledge is crucial in the Galton example. If the crowd guessing were children not farmers, the outcome would have been very different. The point being that the value of betting markets is determined by the domain knowledge of those participating.
With the EU Referendum odds there is far less information to inform the betting for the following reasons:
- Referendums happen infrequently so there is no meaningful ‘form’
- Opinion polls can be flawed by sampling error/bias
- Voters opinions are shaped by ongoing and fluid debates
- Many voters won’t decide until the day
This doesn’t mean that EU Referendum betting odds cannot provide a useful indication of potential voter sentiment, it just means that they should be treated with caution.
Bookie Enthusiasm
Citibank may or may not have good reason to believe “remain” will win, but past elections and bookie enthusiasm should not be among those reasons.
Making assumptions based on the Scotland referendum (as Citigroup did) is more than a bit problematic. This is not the same vote. If anything, the fact that the polls have been so wrong in two recent votes should cause decreased confidence, not increased confidence.
Returning to the top, was it Citigroup who said “Bookies are still enthusiastic the vote on June 23 will come out overwhelmingly in favor of the U.K. staying in the EU” or was it Sara Sjolin?
At least one of them does not understand how bookies operate.
Mike “Mish” Shedlock
In my small experience with betting on horses, Citibank has this backwards. The higher the odds, the longer the shot at winning. Bookies lower odds on a sure thing to even pay, knowing they will likely be paying those bets, whereas they raise odds on underdogs to encourage wild bets from people hoping for big windfalls. Am I reading the analysis wrong here? Or do odds mean something different in the UK?
In general they attempt to balance the books – not caring which side wins.
Small fry bookies sometimes “keep the bet”.
That is – their books are unbalanced and instead of pushing it up to the mob boss (or offloading it somehow), they gamble on the outcome.
But if they lose, and cannot pay up, they can be in trouble in many ways.
Mish
Is Citigroup (CitiBank) comparing themselves to a mob boss?
:::ducking:::
Well now Mish you’re asking our Corporate Overlourds to actually work and learn probability theory. That’s a tall order.
If you say something enough people will eventually believe it.
Brexit will fail.
The world is undergoing climate change because of man.
Ten percent of the world is homosexual.
Clinton is innocent. (Choose your scandal)
Trump is a megalomaniac
Etc. etc.
We brits are more discerning. We recognize Goebbelesque propaganda when we see it……
Is there any information about the number of bets and the sums involved? The same problem with small samples also plays here if the numbers are not significant. How difficult would it be to skew the Bookie numbers if there are parties with relatively deep pockets to skew the numbers before the actual referendum
The bookies have it right but the percentages are wrong. The chances of a Brexit are about the same odds that the Greek government had to exit the EU and reform their country: 0%.
If one had to make a bet based on past behavior… they will stay at the socialist tit.
Does not holding the referendum count as remain ( e.g. Eurocup gets blown up and it is all too dramatic to consider voting) ?
I’ll stick with the numbers created by real money laid on the line by thousands of individuals any day, over partisan polls staged by biased poll takers. Especially corporate pollsters, who know very well that polls actually affect the outcome of elections.
And, really, how often does the long shot win a horse race? Bookies don’t set the odds, betters do.
Or, OK, we’ll take an average between Fox News polls and ABC???? Care to put money on Fox being biased in favor of Hillary and ABC being biased in favor of Trump? Didn’t think so.
In short, opinion polls are bought and paid for by special interests. Betting odds are made by informed individual players.
I just looked over a few studies of betting markets vs. polls and the results were not obvious, mostly polls had a slight lead in accuracy, but no firm way to say one or the other is closer beforehand in any particular vote.
It is too early to make book. Big events between now and June 23, will tip the vote.
For example, a terrorist attack on June 20 could tip the vote in favor of Brexit.
Looks like you were right, but the terrible Jo Cox incident had the opposite effect! It’s worrying how the whole future of the country may be decided by one insane man (and I’m not referring to David or Boris, I mean the murderer!). Safest to vote Out I think – the government will always have another referendum until they get the answer they want and in the meantime at least they have ammunition for negotiation. If we vote In, all negotiation is over because we have signalled that we are happy.
“…but past elections and bookie enthusiasm should not be among those reasons.”
Bookie enthusiasm means nothing but past election results are a good indicator. Money talks and people who are putting theirs on the line are more likely to be right than those who aren’t.
If the odds remain the same as the vote draws near, my cousin in England is going to be very disappointed, as he is for Brexit.
Why Brexit Must Happen | Paul Joseph Watson and Stefan Molyneux
Naaaaah… It should happen, but it won’t for the same reason that correct choices aren’t voted for in the US.
There are pros and cons about an exit of the UK from the EU and that video has nothing to do with those. The bottom line is that the UK will be far more isolated as a loner island if it does decides to leave the EU but will escape the huge costs of supporting the EU if it exists. In any event Cameron put this on the ballot there as a referendum and will have to live with the consequences if it passes.
“There are pros and cons about an exit of the UK from the EU and that video has nothing to do with those.”
Which video? There are two of them above your comment. The first clearly states the pros and is just one of the videos on the topic by Stefan. The second illustrates why so many people in the UK are too uninformed, misinformed, and cognitively biased to realize them, a reasoning problem definitely not restricted to just the UK.
Greg – that was a great video. Of course Britain should leave the EU. If it does not, the country will be unrecognizable in a few short years.
It was interesting what Paul Watson said about Switzerland, how they’re not a member of the EU, and yet they’re thriving. Was also interesting what he said about Czechoslovakia, how they’ve not had immigration, but yet they’re thriving as well.
And what Britain pays out in order to maintain its membership is way too much. As Paul said, that money could make Great Britain great again.
Dewey Wins!!!
It is a 50/50 call for a variety of reasons and the people of the UK will decide on June 23, 2016 when those motivated enough by this issue vote on that referendum in the UK. The EU is fully prepared for a decision either way and there are advantages and disadvantages to the UK exiting the EU. So I really wouldn’t worry about it at all until after the last vote is counted in just a little more than 3 weeks from now. That said, the UK has never cared for the rest of the EU much at all, and the same is true of the rest of the EU about the UK.
I would be shocked if Brexit is victorious. I believe we will see a repeat of Scotland and Austria. Voters are easily fooled by propoganda. Big money almost always wins in the end. Vote manipulation is a science today in the 1st world nations. If voting really benefited the masses the politicians would probably find a way to outlaw it.
I watched this documentary that strongly suggests that UK should get out of EU and it does make few very good points. Some here say that UK can’t make trade deals with anyone without EU but all the evidence points otherwise.
Actually the trade between UK and EU has been diminishing but growing with countries outside the region. How do you explain that? Eu was supposed to be good for trade but all signs show otherwise. It is not free trade, it is bureaucratic nightmare led by unelected officials.
I personally am strongly against EU and it’s flavor of “democracy” since I saw close what the old Soviet was and did. EU picked it structure from the socialism. Any free man – or wanting to be one – should shudder looking these people at the helm of this experiment. I wouldn’t like it to take as long as it took to get rid of the socialism this time.
But whatever your stance is in the issue, the doc is good food for thought.
Fed likely to avoid rate hike before Britain votes on leaving EU
http://www.reuters.com/article/us-usa-fed-brexit-analysis-idUSKCN0YP0DB
Speaking of odds and oddsmakers – Leicester and Silver
The oddsmakers put Premier team Leicester at 5000 to 1 and at the end of the season they all admitted it was a terrible mistake when Leicester won. The odd was concocted by the oddsmakers, and some said never again, since the odds really aren’t that low.
Nate Silver admitted to biasing his coverage of the Trump campaign negatively. He was supposed to be the hero to the sports page by showing how analytics applied everywhere, but then ignored the raw numbers that countered his confirmation bias, which Mish was all over early on.
One looks at news coverage and wonders how can repeated physically violent assaults at Trump events by opponents be regarded as nothing more than the brownshirts out in force in Weimar (pre-Nazi) Germany, yet Trump is the one labeled the violent fascist. The polling that shows Clinton winning seems to be oddsmakers.
Brexit will come much closer and may win. It would be more interesting a betting market if the betters could specifiy final percentages. Then you might have something closer to the Wisdom of Crowds in effect and possibly less effect of bias.
What is conveniently ignored is that the UK can leave the EU but keep access to the single market by rejoining EFTA, similar to Norway. Remain don’t like that because it’s a safe way out of the EU; they wrongly claim it is a pay and no say option, that it is fax democracy. These points are easily debunked. Leave don’t like it because they want to control immigration. Leaving the EU does not achieve this but it is a necessary step and being in EFTA/EEA gives us more control than being in EU/EEA.
There is a plan called Flexcit that details how we can leave the EU safely by keeping EEA access as an interim step. The booklet can be download from here
http://www.eureferendum.com/themarketsolution.pdf
and a video presentation can be seen here
https://www.youtube.com/watch?v=GliFMIHiGog
Also not highlighted is that the referendum is about who governs our country. The EU is the only trading bloc where you need to give away sovereignty. If the government told the truth instead of using deceit we would not have joined in the first place, and now we would be voting to leave the political and judicial baggage that is the EU.
The UK cannot make its own FTAs as the EU is a customs union, and so represents its members. The EU has numerous trade arrangements with other countries that the UK can take advantage of. Where the is no EU agreement, I guess we trade under WTO rules.
It is the EU’s strategy to replace its member states on global and regional bodies. The government tell us we need to be in the EU to have influence, but the loss of the UK’s voice at global bodies will result in a loss of influence.
It is mainly the establishment that want us to remain and they have huge power; same as in most EU countries. Ask the people though and you’ll get a different answer. We are being told we are voting to remain in a reformed EU, but Cameron’s’ deal is not legally binding on the EU. The EU cannot be reformed from inside. It’s intention has always been to be a supranational government. The status quo that many believe they are voting for is not on offer. Treaty change is coming and by voting to remain we’d be handing Brussels a blank cheque.
The EU is evil: One ring of stars to rule them all and in the darkness bind them.
Woah! I’m really loving the template/theme of this blog.
It’s simple, yet effective. A lot of times it’s very difficult to get that “perfect balance” between usability and visual appeal.
I must say you have done a amazing job with this.
In addition, the blog loads super fast for me on Chrome.
Outstanding Blog!
Woah! I’m really loving the template/theme of this blog.
It’s simple, yet effective. A lot of times it’s very difficult to get that “perfect balance” between usability and visual appeal.
I must say you have done a amazing job with this. In addition, the blog loads super fast for me on Chrome. Outstanding Blog!
Thanks Jason – Very much appreciated.
Very few people preferred the old layout. One who did initially recently changed his mind.
Mish