How accurate are betting markets?

They were horribly wrong on the 2019 Australian federal election outcome.  Now I have come across an article from my files concerning Sportsbet’s odds on Australian interest rates in 2018.  This was not a good guide!

In the Australian Financial Review of 22 September 2017, Philip Baker noted that Sportsbet had two interest rate increases in 2018 as the $2.80 favourite, while just one increase was priced at $2.88.  No change was paying $3.60.  In fact, interest rates did not change in 2018 and the Reserve Bank cut interest rates in June 2019.

It is thought that betting markets are accurate because people with inside knowledge gamble and win from the great unwashed who also gamble.  But insiders are not always right!

More in my book “Forecasting: the essential skills

Charlie Nelson