In the fast-moving crush of a campaign news cycle, prediction markets are an invaluable source of real-time feedback on the likelihood of the events they predict. There will be some instant polls and pundit reactions in the day or two following an incident--but only prediction markets provide objective real-time data.
And in the wake of last night's Fox News GOP presidential debate, the markets come bearing bad news for Texas Gov. Rick Perry. The event marked Perry's third debate performance since he announced his candidacy--and early reviews have been rather brutal. The conservative Weekly Standard ran an appraisal of Perry's showing this morning whose headline said it all: "Special Editorial: Yikes." Likewise, the real-time feedback from the prediction markets (both Betfair and Intrade) is stark and confirms the pundits' concern over Perry's performance. Perry's likelihood of attaining the Republican nomination has been in a free fall since the debate.
Much, but not all, of Perry's likelihood has been transferred to Mitt Romney. We can now infer from the prediction markets that Romney is the clear frontrunner for the Republican nomination, even though he is still trailing Perry in all polls.
One note of caution for Romney enthusiasts, however: Perry's suddenly shaky status could create an opening for another top-tier competitor for the nomination. Before the debate, prediction markets assessed the likelihood that either Perry or Romney would take the nomination at 79 percent; now that number is down to 74 percent.
Update 3:30 PM ET: I have updated the chart above to reflect Perry's continued slide throughout the day; the markets now have him at a 30.7 percent likelihood of winning the Republican nomination. That's down significantly from the 38.5 percent likelihood the markets assigned to him going into last night's debate. Romney has continued to pick up some of that likelihood; he is now at 44.0 percent, up from 39.5 percent at the outset of last night's debate.
David Rothschild is an economist at Yahoo! Research. He has a PhD in applied economics from the Wharton School of Business at the University of Pennsylvania. His dissertation is in creating aggregated forecasts from individual-level information. You can follow him on Twitter @DavMicRot and email him at PredictionBlogger@Yahoo.com.