Ladbrokes says betting markets will face “tough questions” on why they got Brexit wrong
Ladbrokes said it would have to face some "tough questions today" as to why the betting markets got the EU referendum result so wrong.
Throughout yesterday Ladbrokes' odds, as well as those of fellow bookmakers William Hill and exchange platform Betfair, put the Remain camp in a firm lead.
By late afternoon, Ladbrokes was posting odds of 1/6 in favour of Remain, equivalent to a weighting 81 per cent in favour of voting to stay in Europe, while the verdict rose to around a 90 per cent certainty as polls closed at 10pm.
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In a statement released this morning, the bookie's head of political betting Matthew Shaddick acknowledged that it should have considered the fact that those who were placing bets were also voters.
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"Whilst I see no evidence that the betting was deliberately "manipulated" by big money, I think there's something to be considered in the fact that the most affluent sections of society were generally behind Remain," Shaddick said.
"Maybe there just aren't enough dispassionate investors out there to correct that possible bias, even in a multi-million pound market like the referendum."
Shaddick also said:
Sure, we rode the wave of "the pollsters are all over the place, follow the money", although in Ladbrokes' defence, we did take several opportunities to point out the potential pitfalls of assuming that the favourite always wins. The truth is that bookies do not offer markets on political events to help people forecast the results.
We do it to turn a profit (or at least not lose too much) and in that respect, this vote worked out very well for us. Nobody at Ladbrokes' HQ will be criticising the predictive powers of our odds, they'll be looking at the money we made.
The majority of players in the market were actually backing Leave, but that doesn't matter to the prices; all that counts is the amounts of money. One £10,000 bet counts the same as 10,000 separate £1 bets.
Unfortunately (or perhaps not) we can't run this vote multiple times to test whether the probability estimates were even close. Neither do we have enough evidence from different elections to be confident – the era of big, liquid multi-million pound political betting markets is a relatively new.one. One could argue that the betting did a reasonably good job in the last two US Presidential elections and the Scottish Independence Referendum.
Even the 2015 general election odds had something to be said for them; the betting gave the Tories an 80 per cent chance of being the largest party even as the polls anticipated a dead heat.
Ladbrokes added that although it could just be one of the "inevitable, normal occasions where an outsider wins", that did not mean it would not have to "reflect on all [of the] potential flaws and decide how we best interpret them in future".
Read more: Remain seems to be leading – the reality is more misty
Pollsters will also be under scrutiny, as two of the final polls released yesterday also handed the Remain camp a comfortable lead over Brexiteers.
This is the second time pollsters have failed to predict a major political result in Britain, following the surprise Conservative victory of last year's general election.