TV3 Leaders' Debate Analysis

The TV3 leaders' debate on Monday night was telling for how little was revealed by the leaders that wasn't already known. Both leaders, and John key in particular, stayed on-message for much of the debate.

The most notable feature of the debate was the near-complete absence of moment in the price of PM.National. It was a flat line the whole way, but for a very minor upwards price movement about 10 minutes from the debate's end. Traders were sending a message: we have heard this before.

National's flat line was particularly striking given the rollercoaster ride that stock had been on a few hours earlier. In the morning, news was that Peter Dunne had been offered thousands of dollars from a businessman after agreeing to oppose international fishing restrictions. This news sent National's stock falling 4% in the space of an hour. However, the afternoon saw a strong recovery for National following John Key receiving endorsements from former rugby stars Michael Jones and Inga Tuigamala.

So the contrast between earlier price movements and the leaders' debate itself was striking.

PM.LABOUR did move during the debate, downwards in two steps and but recovered to where it started shortly after the debate's end. There was an initial downward's movement as the leaders spoke about trust at about 7:20pm, but the price quickly returned to where it was in the minutes following. This was followed by a larger downwards price adjustment of about 1% at about 7:35pm as the leaders discussed longevity and change. Traders responded negatively to the Prime Minister on this point.

However, this price movement did not stick either, PM.LABOUR returning right back to its initial price in the minutes following the debate.

With neither party's chances of leading the next government making any significant change end to end in the debate, this debate was a draw.

National Wins Leaders' Debate

National's chances of leading the next government increased by 5.1% last night according to iPredict traders, handing John Key a decisive victory over Helen Clark in the first leaders' debate.

Labour's re-election chances fell 4.4%.

By the end of the debate, Labour was a 30% likelihood of leading the next government, a significant increase from its position a week ago where it was tracking in the low twenties. However, this morning PM.LABOUR is trading down at 25 cents. Last week's gains have been largely undone.

As in share markets, price movements in prediction markets are caused by the arrival of new information and outcomes which are different from expectations. TVNZ commentators after the debate said that while the Prime Minister performed well, this was to expected, whereas Key in his first leaders' debate outperformed expectations.

Print media commentators generally agree, Audrey Young saying

She had by far the best campaign launch on Sunday but he wiped the floor on the debate.

John Armstrong:

While there was little to separate the pair in a pretty even contest, John Key has to be declared the winner of tonight’s debate…She was as rock solid as always, but predictable.

Fran O'Sullivan, however, gave the debate to Clark:

Clark scored best on the issue du jour - the international credit crisis. She has a post-election plan. Key doesn't.

Traders on iPredict are unequivocal: National's chances of an election victory increased sharply at Labour's expense, and on this measure victory in the first leaders' debate is National's.

Click on the chart for a larger view.

Who Will Win The Leaders' Debate?

One of the great things about prediction markets is their real-time evaluation of news events. Price changes in PM.LABOUR or PM.NATIONAL in response to news is like running a real-time poll. And a prediction market can tell you the political value of that news - a statistic not available from any other source, certainly not traditional polling or even, arguably, The Worm.

In view of that, iPredict will be measuring the performance of leaders in tonight's debate in the way that matters most: who's election chances go up during the debate, and whose goes down? That is, ultimately, the measure of any politician's performance.

Following the lead from InTrade, we will use the following method for determining the debate winner: the largest increase in absolute likelihood of being elected government. The before and after values will be calculated as the average market price for PM.NATIONAL and PM.LABOUR in the thirty minutes before the debate commences and the thirty minutes after the debate finishes.

The leaders' debate is on TV One at 7:00pm tonight.