Opinion polls on the Scottish independence referendum have shown some conflicting results although the majority of polls suggests it is neck and neck between the 'Yes' and 'No' camps. As political pressure intensifies, some market participants advise focusing on bookies' odds rather than on the polls.
Pro-independence Yes campaigners stage a demonstration outside the BBC Scotland Headquarters in Glasgow on September 14, 2014 to protest against alleged biased by the BBC in its coverage of the Scottish referendum. Campaigners for and against Scottish
The most recent polls have suggested 'No' and 'Yes' camps are just about neck and neck as the Scottish independence referendum approaches.
Sterling has recently been sensitive to these polls and sentiment surveys, especially after the first significant win of the 'Yes' camp in a poll on Saturday, September 6, when the YouGov poll for the Sunday Times showed pro-independence voters had gained the upper hand, with 51% saying 'Yes', with the 'No' vote dropping to 49% after excluding undecided respondents. More polling results are to come on Wednesday, a day before the vote.
Commenting on the sterling move after the referendum, IHS Global Insight's Howard Archer said "there is likely to be a major reaction, particularly for sterling, whichever way the vote goes. A vote for independence is likely to result in a further sterling sell-off; a vote for Scotland to remain in the UK is likely to lead to a significant relief rally for the pound."
Polls vs bookies
The latest poll by Panelbase on Sunday showed a tight race, with 51% calling for maintaining the status quo and 49% calling for separation. An Opinium/Observer poll on Saturday showed a larger gap with 47% set to vote 'yes' against 53% for the 'no' camp, while a Survation poll showed earlier on Saturday that only 46% of Scots favored independence against 54% in favor of Scotland remaining a part of the UK.
But a poll by ICM for the Sunday Telegraph over the weekend showed an unexpectedly high number in the 'Yes' camp, as much as 54% - so far the strongest support for independence. The ICM/Sunday Telegraph poll was done online with a smaller sample of respondents.
On his blog page, YouGov's Political and Social Research Team chief Anthony Wells wrote that ICM poll for the Sunday Telegraph looked "rather odd ... with a smaller sample size than their usual online efforts." Berenberg's UK chief economist Robert Wood said the ICM poll was "a shock result" and called it an 'outlier' within the range of other polls conducted so far.
Christophe Barraud from Market Securities Kyte Group offered some sober input into the whole poll frenzy ahead of the September 18 plebiscite.
In his note to clients on Monday, Barraud wrote that his "guess was that investors paid too much attention to polls and clearly overstate the worst case scenario." Specifically on the opinion polls, Barraud wrote "the problem of polls is that they are too volatile and can be easily manipulated contrary to betting markets which remain the best gauge in this kind of situation."
"As an expert of betting markets (following my PhD) and surveys (best forecaster for US data since the end of 2012), I can say that it’s not difficult to manipulate a poll based on a small sample (less than 2000 people) while it's almost impossible to do the same for betting markets as punters are placing real money. In other words, if you want to manipulate a betting market, it will cost millions! That’s why the academic literature tends to confirm that prediction markets beat polls," Barraud added.
The latest odds data from all the UK's major betting companies show between 80% and 83% probability that Scotland will remain a part of the UK while between 20% to 40% suggest otherwise. For example, Ladbrokes, SkyBet and Williams Hill's bets on 'no to independence' are 1/4, which gives a probability of 80%. The odds for 'yes to independence' are either 11/4, 7/2 or 10/3 - all between 20% and 40% for independence.
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