Scoring the Pennsylvania Primary

How do you score a bruising fight like the Pennsylvania primary? In politics, it seems, expectations are everything. And regular readers will not be surprised to hear that I would argue that political prediction markets can help us understand which candidates actually exceeded pre-poll expectations.

Some simple observations:

Clinton‘s 9.5 point victory margin was roughly what one might expect from a candidate who had been rated as having a nine-in-ten chance to win the primary.

Consistent with this, the electoral math appears roughly unchanged by last night’s result. Over recent weeks, markets have consistently assessed Obama‘s chances of winning the Democratic nomination at about four-in-five, and early trading this morning suggests this assessment remains unchanged.

If one simply relied on newspapers to track the race, one might be overwhelmed by the flow of bad news (or at least intense scrutiny) of Obama since the Texas and Ohio primaries. In fact, markets rate Clinton the real loser from the six week campaign in Pennsylvania: her chances of winning the nomination were as high as 29 percent following those earlier victories; today they are down to 18 percent.

Looking forward, prediction markets suggest that Obama and Clinton are likely to trade victories over coming weeks. Currently Obama is favored in North Carolina, Oregon, and Montana, while Clinton is favored to win Indiana, West Virginia, and Kentucky. My full W.S.J. column analyzing recent movements in political prediction markets (written jointly with my Ph.D. student, David Rothschild, at 1 a.m. last night) is available here.