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Analysis on the Prediction Results of the 2009 Magistrate and Mayoral Election in Taiwan

Chen-Yuan Tung, Tzu-Chuan Chou, Jih-Wen Lin, and Hsin-Yi Lin
2011 / 05
Volume 18, No.1

pp.63-94
10.6612/tjes.2011.18.01.63-94
Paper

Abstract

Opinion poll has been the most widely used way to conduct election prediction. However, recently prediction market has become another widely applied prediction mechanism, attracting the literature to compare the accuracy of the two prediction methods. According to trading data of the Exchange of Future Events and opinion polls collected by this study, this paper analyzes the prediction results of the 2009 magistrate and mayoral election in Taiwan, and compares the prediction accuracies on this election between prediction markets and poll institutions. What this paper finds are: for prediction contracts on election winners, the weighted average prices of prediction markets are positive and statistically significant on the ratio of winning elections and can be regarded as the candidates' probability of winning elections. In addition, based upon five indicators of correctness rate, precision rate, hit rate, false alarm rate and Kuipers score, predictive power of prediction markets on election winners is obviously higher than that of poll institutions. For prediction on vote shares, predictive power of prediction markets is higher than that of poll institutions within 20 days before the election, and prediction accuracy of prediction markets is getting higher along with approaching the expiration of the contracts. Nevertheless, we also agree that opinion survey can help researchers conduct covariance analysis, which can be used together with prediction market to reinforce the findings of each other.

Keywords

prediction markets

opinion polls

accuracy

magistrate and mayoral election