Bubbles, Blind-Spots and Brexit

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ID: 28544
2017
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Abstract
In this paper we develop a well-established financial model to investigate whether bubbles were present in opinion polls and betting markets prior to the UK’s vote on EU membership on 23 June 2016. The importance of our contribution is threefold. Firstly, our continuous-time model allows for irregularly spaced time series—a common feature of polling data. Secondly, we build on qualitative comparisons that are often made between market cycles and voting patterns. Thirdly, our approach is theoretically elegant. Thus, where bubbles are found we suggest a suitable adjustment. We find evidence of bubbles in polling data. This suggests they systematically over-estimate the proportion voting for remain. In contrast, bookmakers’ odds appear to show none of this bubble-like over-confidence. However, implied probabilities from bookmakers’ odds appear remarkably unresponsive to polling data that nonetheless indicates a close-fought vote.
Reference Key
fry2017bubblesrisks Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Fry, John;Brint, Andrew;
Journal risks
Year 2017
DOI
DOI not found
URL
https://www.mdpi.com/2227-9091/5/3/37
Keywords Keywords not found

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