Wednesday, April 20, 2011

Need To Consider Conditional Probabilities Of Intrade Prices To Find Winning Odds Of Republican Presidential Candidates: Romney Has Better Chance Than Appears

Intrade has a security trading for individual presidential winners. Right now, as of 6:45 PM EDT, April 20, 2011, it shows a last trade price of 59 for Obama and 12.2 for Romney, currently the highest priced Republican.

The odds of winning the presidency are obviously of course conditional on receiving the nomination to run for the office and the odds of winning the nomination must be included in computing the odds of winning the presidential election.

Without considering conditional probabilities, the odds appear to be 5 to 1 for Obama to beat Romney in the 2012 election for the US presidency.

Since the Republicans have not as yet chosen their candidate for the presidential election, have no clear candidate as yet, and there are many potential candidates, the odds of any one candidate getting the Republican nod are not very high at this time. Obama, unlike the Republican field of hopefuls, has a 91.9 (last trade Intrade price) percent chance of getting the Democratic nod to be the Democratic presidential candidate in the next election. Romney has a 24 (last trade Intrade) percent chance of getting the Republican presidential nomination.

Adjusting for the conditional probabilities of Obama and Romney getting their respective parties' nominations lowers the odds of Obama winning the next presidential race. Obama's odds of winning are recomputed to 64.2 and Romney's to 50.8. Obama's odd of winning a second term as president are 1.26 to 1, or about 5 to 4, he will win over Romney.

The presidential race between Romney and Obama is much closer than the listed prices of the Intrade security for individual presidential winners would suggest: 5 to 1 becomes 5 to 4.

While Trump's presidential bid is very speculative at this point, it appears that his recomputed odds based on the low conditional probability of getting the Republican nomination give him a good chance at this point in time of beating Obama. His recomputed odds are about 3 to 2 that he could beat Obama if he got the nomination. Of course if he became a serious presidential candidate, the public's perception of him might change, which would change his odds of winning.

Methodology: Recomputed odds are last Intrade price of individual winning the presidential election divided by last Intrade price of being their party's presidential nominee. For example for Obama: 59/91.9 = 64.2 percent.


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  2. Can I say that the degree of achieving a conditional statement (if x
    then y) is equivalent to a conditional probability p(y|x)?