Newt Gingrich has won the South Carolina primary, elevating him to a 25 percent chance to win the Republican nomination in online futures markets. This is the first serious assault we've seen on Romney's once iron grip on this particular set of markets in months, which have barely wavered until tonight in their conviction that he will eventually win the nomination. Still, he continues to be the heavy frontrunner with about a 2 in 3 (66 percent) likelihood of gaining the nomination.
Sources: Betfair and Intrade
There are several reasons why Romney still has a serious lead over Gingrich. First, he has a larger national organization and more money. Second, he has an institutional advantage of an early start; Gingrich was unable to even get on the Virginia ballot, where he lives, as he surged too late to focus on ballot access. Third, the markets assume that Gingrich is still un-vetted by the current Republican electorate. He is more likely to have negative surprises for voters as they start paying attention before their primaries.
Barack Obama has been a clear winner over the last few days; his likelihood of victory in November has reached its highest point since mid-July. He is currently at about 55 percent likelihood of reelection. While this is correlated with Gingrich's surge, it is hard to disassociate it from all of the other developments in the race. Yet, the latest aggregated polling trends from Real Clear Politics have Obama with a small lead of 1.9 percentage points in a potential match-up with Romney; that same rubric has Obama 11.0 percentage points over Gingrich. Gingrich's electability concerns will inevitably dog him in future primary contests.
David Rothschild is an economist at Yahoo! Research. He has a Ph.D. 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. Follow him on Twitter @DavMicRot and email him at firstname.lastname@example.org.