As the Brexit referendum on June 23 approaches, financial markets are becoming increasingly concerned about the outcome since it will lead to large movements in asset prices. For instance, one would expect that a vote in favour of remaining in the EU would be positive for UK asset prices, while a decision to leave would trigger huge uncertainty that would be generally negative for UK asset prices.
Considerable attention is therefore focused on surveys of voting intention that are conducted regularly. But what can one learn from them? Perhaps surprisingly, the answer is less than one might think.
Surveys must reflect accurately the views of the broader population. But views about the benefits of membership in the EU, and the likelihood of voting, vary across different groups of society. For instance, it has been argued that older voters are more negative about remaining in the EU, and more likely to vote, than younger citizens. If surveys fail to be representative of the wider electorate, they can be misleading.
Here we show that there are good reasons to be dubious about the value of these surveys, relying on a dataset collected by the Financial Times of 201 surveys conducted between 9 September 2010 and 12 April 2016. The information provided includes the fractions voting Remain, Leave, the fraction undecided and, importantly, the institution that conducted the survey.
The figure below shows that, in the full sample, surveys show that just over 40% of respondents support remaining, and just below 40% support leaving. These surveys thus typically predict that the outcome of the referendum will be for the UK to remain in the EU.
Indeed, in 115 of 201 surveys (or 57%), Remain is ahead of Leave. Since the results are rounded to the nearest percentage point, in another 15 cases (7%), the outcome is a tie.
The table below presents the results in greater detail for the full sample and for 45 surveys conducted in 2016.
|Full sample, 201 obs.||41.4
|2016, 45 obs.||42.6
These results show that the Remain side is generally ahead by a small amount. Furthermore, the fraction of undecided voters, which is almost 20%, is very large. But most importantly, there is a huge variation in results between surveys, much larger than one would expect on the basis of sample variation.1