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With three weeks to go the value French President bet is that Marine Le Pen won’t do it

April 2nd, 2017

 

Alastair Meeks looks to follow up on his Dutch success

There are few more baffling markets at present than the market on the next French president.  It’s a very active market  with more than £8 million traded so far, so its oddities can’t be put down to there being few punters.  Yet the odds seem very hard to square with the polling.

The electoral system is designed to produce a centrist.  The voting takes place over two rounds.  First, the full range of candidates are put to the nation.  The two front runners then go through to a head-to-head.

Marine Le Pen has for months been getting polling results that suggest she will comfortably make the last two, without ever recording an opinion poll that suggests that she is even within touching distance of beating the person who at that given moment would be projected to face her in the last round.

For some time, the polling has suggested that her likely opponent will be Emmanuel Macron.  Both of them are consistently polling in the mid-20s and recently M. Macron has appeared to open up a slight lead on Marine Le Pen.  Her voters seem very certain in their minds that they will back her while his are notably much less fixed on their choice.

Nevertheless, both currently have l’eau bleue claire between themselves and the chasing pack.  Their closest challenger, Francois Fillon, is polling 5% or more behind them.  Jean-Luc Mélenchon is gaining ground but remains fourth for now.

The first round of voting is only just over three weeks away.  The polling may be wrong (in particular, we might reasonably suspect either shy Fillonites who do not wish to admit supporting someone with such serious allegations against him or shy Mariners who do not want the albatross of supporting the FN hung round their neck) or the public may change their minds, but time is running out.  The jelly is setting.

So how should we approach this market?  We need to consider the two rounds in turn.  Given where the polling currently stands, it seems to me that we need to consider three possible last round candidates: Marine Le Pen; Emmanuel Macron and Someone Else.  In an ideal world you would consider each of the also-rans separately but it gets too complicated and given current polling the effort is not yet justified.

Based on current polling, I assign these probabilities of 90%, 80% and 30% respectively (they need to add up to 200% because there are two berths to fill).  I make MLP a 90% chance of getting through to round 2 (her supporters are very clear in their own minds).  I make Emmanuel Macron an 80% chance of getting through to round 2, with the bulk of the other 30% made up by Francois Fillon.  For convenience, I shall treat Someone Else as being Francois Fillon, though the overlap is far from complete.

Then we need to consider how each match-up would play out.

Marine Le Pen’s chances of becoming next president are say 1 in 20 if she faces Emmanuel Macron and say 2 in 10 if she faces Francois Fillon.  Every poll against Macron shows her being annihilated.  To beat him, she would need a Black Swan (or perhaps a Siberian Goose).  The polls against Fillon are rather closer, though still not all that close (and if Francois Fillon makes the last two, he will be outperforming current polling), and there are a lot of abstentions in the figures.

I rate Emmanuel Macron’s chances in a last two match against Francois Fillon at 75%.

If there are only three contestants and one has a 90% chance of being in the last two and one has an 80% chance of being in the last two, the contest possibilities must be:

70% MLP vs EM

20% MLP vs FF

10% EM vs FF

From Marine Le Pen’s view, that means that if my assessment of the probabilities is correct, she has 0.05 x 0.7 + 0.2 x 0.2 chance of winning = 7.5% chance.

From Emmanuel Macron’s view, he has a 0.95 x 0.7  + 0.75 x 0.1 chance of winning = 74% chance.

From Francois Fillon’s view, he has a 0.8 x 0.2 + 0.25 x 0.1 chance of winning = 18.5% chance.  (However, note that I have let Francois Fillon stand for all the other contenders, so his probability is not really that high.  I would credit him with roughly a 12% chance of winning with the other 6.5% largely, but not completely, falling to Jean-Luc Mélenchon.  Certainly, I regard the current price on Betfair for Francois Fillon of 5.9 as far too short.)

Now obviously a lot of people disagree with me about the underlying odds or Marine Le Pen wouldn’t be 4.9 on Betfair right now.  Feel free to do so also.  But I still think it’s very possible that Marine Le Pen might drift rather than tighten after the first round as the size of her task against Macron is then focused on, if that is indeed her last round opponent.  The more likely you think that Marine Le Pen will reach the last two, the more that achievement should be regarded as baked into her current price.  And it may well be that after the first round her task looks harder, not easier.  On my assessment of the probabilities, if she finds herself facing Emmanuel Macron in the last two, her chances have actually got worse.

So if like me you don’t think that in reality Marine Le Pen stands more than an outside chance in the last two and you intend to lay her on Betfair, it may not pay to wait for the first round to take place.  This may be as short as her price gets.

Alastair Meeks