Why Most Got The Brexit Vote Wrong

Yesterday, we noticed something strange in the political bookie statistics - the number of bets being placed yesterday afternoon were 2:1 for leaving but odds only showed a 17% probability of leaving?

How can this be the case? The answer was pretty simple really, the odds makers were looking to offset risk not take a side on the final voting result. When the votes were weighted by the bet amount. The greater amount of capital being wagered skewed the probability towards the "Stay" camp.

An excellent analyst, Nick Colas from Convergex, recently included the following in a note: "It is simple (too simple, we believe) to say that the only market battle this week is the Brexit vote. That conflict seems largely decided. As we've noted in prior notes, the gambling odds available from offshore bookmakers have never forecast a “Leave” vote as the likely outcome. Current odds of a “Brexit” are 25% and “Stay” is at 78%. Yes, a few polls went the other way last week, but more recent surveys show “Remain” in the lead.

We came across our tidbit of information by watching the twitter feed of British Political Betting Site, "Ladbrokes Politics". Most of the day contained updates like this (https://twitter.com/LadPolitics/status/745564963599749120) but towards the end of the day, this tweet (https://twitter.com/LadPolitics/status/745984507220795393) confirmed the number of bets was leaning towards "Exit".

The issue was highlighted Stealth Growth Insider newsletter here. Sometimes, people think they have the answer and forget to ask the follow up question.

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