Prof. Leighton Vaughan Williams highlights a value bet in the EU Referendum markets.
On one thing the spread and fixed odds markets are of identical mind. That is about the likely turnout in the EU referendum on what is expected to be a pleasant Thursday next week. In setting the line, due note will have been taken of the level of interest on the official closing date for registration. So great apparently was this interest that the application process shut down and the deadline had to be extended to allow the great mass of new would-be referendum voters to grasp the opportunity to cast their eager ballots.
This seems to have been the catalyst that has driven up the line on the likely turnout on polling day. It currently stands at 68 per cent on the spreads and fixed-odds market. The 68 per cent mid-point on the spread betting markets kind of makes sense, and reflects the relative upside and downside to a bet placed at 68.5 per cent and 67.5 per cent respectively. It reflects the fact that turnout could easily soar, especially on a balmy summer’s day, with the future of the country for a couple of generations in the balance, and a race as tight as a hangman’s noose. It is very unlikely to collapse below, say, 63 or 64 per cent.
This reasoning should not be transferred to the fixed-odds arena, however, where it is simply a case of betting that the turnout will be above or below 68 per cent. In this sort of market, it does not matter how far right or wrong you are, simply that you are right or wrong. So the hearty upside and limited downside is not an issue the bettor needs to chew on. It is simply a matter of estimating the most likely single turnout figure, not the potential up/down variation around that figure. On this way of thinking, 68 per cent seems somewhat on the high side. Not so long ago the line was set at about 60 per cent. Perceptions of the race, notably the perhaps unexpectedly high engagement on social media, have changed since then, but surely not by 8 per cent. In other words, the line was either wrong then or it is wrong now. More likely, it is both. 60 per cent was too low then and I judge that the current 68 per cent is too high now.
Open an account with BETFAIR and when you bet £10, you get £30!
It’s true that the referendum is coming not long after the electorate has been registered for the local elections, that the campaign has been long, fiery and controversial, and that both campaigns are desperate by hook and sometimes ‘crook’ to drive turnout to themselves. Every vote counts in the referendum as well, unlike in the General Election when most constituencies are effectively locked up before a single elector turns up to cast a ballot.
But this is different to a General Election, where most people have some sort of idea of whom to vote for or at least to vote against if they can be bothered to shuttle themselves from cosy armchair to polling station. In the current referendum, on the other hand, a great number of people are confused and the self-aware realise in many cases just how uninformed they really are. The default position of many would-be electors in this state is to defer to the armchair, garden, pub, beach, or anywhere other than being forced to make a hard choice. I’m not saying this defection rate will be on a mass scale, but it may be enough to depress turnout to General Election levels. In 2015 that was about 66 per cent. I’ll go with that as my indicator, and take the 5-6 with William Hill that turnout will be less than 68 percent.
Follow Leighton on Twitter @leightonvw