Why Obama Won: It’s the Economy, Stupid

The day before the election, online odds-making markets peg Obama’s chances at 90%. But what’s more interesting is how correlated those odds have been with the stock market over the past year. If the market had not crashed, would Obama have won? (Update: McCain agrees: he pointed out in an interview today (12/14) that his poll numbers dropped with the Dow.)

An interesting piece over at (politically neutral?) TechCrunch notes that it not only seems as if Obama has already won, but the markets are pegging the odds at about 90%.

“Proper” markets for real-world events are not legal in the US – as opposed to the clearly well thought-out and regulated mortgage industry. Nevertheless, Intrade soldiers on, creating at least a stand-in. As noted in an interesting piece by Strumpf, historical (betting) markets proved quite accurate: “In the fifteen presidential elections between 1884 and 1940, the underdog in mid-October won only once (in the closely fought 1916 election).”

The common wisdom is that the financial crisis is the key factor in the (likely) Obama victory. So I had a peek at what a Dow Jones – vs – Obama-will-win-odds relationship might look like.

It’s quite remarkable (click on the graph for full size):

Dow Jones index vs Odds that Obama wins

Dow Jones index vs Odds that Obama wins

The left (blue) scale shows the Dow Jones Industrial Average index for the period, and the right (red) index shows the Intrade value for Obama, approximating the percentage chance that he will win the Presidency.

The time series goes back to when Intrade started tracking Obama, back on October 24, 2006. The markets and Obama’s odds seem unrelated until about a year ago. After that, it’s almost eerie.

5 Comments

  1. Carlo

    I COMPLETELY AGREE, BUT IT SEEMS AS THOUGHT OBAMA IS OUR NEW PRESIDENT🙂

    Like

  2. Whatdaflux

    Comparing stock prices to “Odds that Obama wins” ? There really isnt an actual graph going on there then hmm? How about if I made one like, Chocolate pudding and the Odds that the Price of tea in china IS actually something to worry about ? I figure while were in fantasy land, fantasy rules can be supplied.

    Like

  3. Texas Pharmacist

    Then why did it up right before the elections and down right after Obama was elected. Where is the blame in regards to incumbent democrats who controlled most of the house and senate finance commitees? Income redistribution will not work. Money is time and people will not invest their time to make money if it’s just going to be taken away and given to someone else. Most will choose to spend their time how they choose when there are not any rewards to investing that time to send their children to college, to get that new boat, to save for retirement. If time becomes money and money is taken away to give to someone else who chooses not to invest their time in their own lives, then people in any part of the world will choose to spend their time on themselves and not others.

    Like

Trackbacks

  1. US Election 2008 Web Monitor
  2. US Election 2008 Web Monitor and Obama casts ballot as polls open across eastern U.S.

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