The Signal

Republican convention fails to move markets, but expect a bounce in polls (and ignore it, for now)

Two stories will play out today as the floors are swept and the balloons popped at the Tampa Bay Times Forum: That Republican nominee Mitt Romney will receive a bump in the polls after accepting the nomination, and to pay no attention to this bump. These stories evidently do not cancel each other out.

The prediction markets we follow are generally uninterested in temporary inflations like these. (The same will probably be true for President Obama this time next week.) In fact, the spread in the gambling markets moved slightly in Obama's favor from before to after the Republican Convention. This does not mean the Republican convention was unsuccessful. Sure, there were some strange moments, but most of the events went off without a hitch. It simply means it was not a homerun. Romney is challenging an incumbent president, so anything less than a picture-perfect convention is going to give the market a sense that he's running out of time to make his case for a change of leadership.

This chart shows both overall likelihood of reelection for Obama, which moved from 58.9 to 60.9 from Monday morning to Friday morning, and small but non-negligible drifts in several key states. Ohio drifted upward with Obama's reelection likelihood, Florida ended up where it began, and Virginia was similarly unmoved.

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Likelihood of Victory for Obama

Soucres: Betfair, Intrade, HuffPost Pollster, and RealClearPolitics

Movements in polls around conventions are nonetheless a meaningful and interesting phenomenon to follow. Mark Blumenthal outlines several key points: First, poll movements from conventions can be temporary or permanent. Second, poll movement has decreased over time, probably due to decreased network coverage, diminished ratings and the never-ending campaign cycle. (The first official filing for the 2012 primaries were more than a year before the election.) Third--and this is the easiest one for people who follow politics to forget--many people do not start seriously following the campaigns until Labor Day.

There is a huge value to polls in understanding the outcome if the election were held that day. That is both interesting and meaningful for some people. But most people just want to know who is going to win, and for that the post convention polls have very little meaning.

Follow the state-by-state and overall presidential predictions in real-time with PredictWise.com.

David Rothschild has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. Follow him on Twitter @DavMicRot and email him at thesignal@yahoo-inc.com.

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