Parsing the Indiana and North Carolina Primaries

Yesterday, Democrats voted in Indiana and North Carolina. My latest W.S.J. column parses the results. A few highlights:

With Barack Obama and Hillary Clinton trading victories in North Carolina and Indiana, it’s tempting to call Tuesday’s primary vote a split decision. Instead, political prediction markets have declared Senator Obama a clear winner.

Senator Obama began Election Day rated a 76 percent chance to win the Democratic nomination. By the time the poll results were finalized, the markets had reassessed his chances at 89 percent. This 13 percentage-point rise makes Tuesday’s primaries the best day of the campaign for Senator Obama since the surge of momentum he enjoyed after the Iowa caucuses.

On the flipside, Senator Clinton’s chances of securing the nomination were cut in half, falling from 22 percent to 10 percent.

The political junkies amongst us will be easily recognized today: we are the bleary-eyed folks hovering over the coffee pot.

The Indiana race turned out to be surprisingly close, and while C.B.S. confidently called the race minutes after 8 p.m., the other networks waited until about 1:15 a.m. While C.B.S. was ultimately correct, you can bet there were some white knuckles as the vote count came in closer than expected:

Interestingly, when C.B.S. made its early call, prediction markets still rated Senator Obama a 1-in-14 chance to win. His stock dipped briefly in response to that call, but within 15 minutes, it became clear that C.B.S. didn’t have any special information, and Senator Obama’s stock quickly recovered to its previous level.

Thus, political prediction markets clearly suggest that C.B.S. analysts took a pretty big gamble.

The propensity of committees of expert analysts to be overconfident is a widely documented phenomenon, and if the C.B.S. bigwigs are interested, I’m willing to bet that greater reliance on the wisdom of crowds can serve as a useful counterweight.

It seems pretty unlikely that the network executives intended their station to risk a 14-to-1 bet.

A full wrap-up is available here.