Tuesday, August 26, 2008

Iowa Electronic Markets Branching Out

Iowa Electronic Markets Branching Out

For the first time in their 20-year history of political trading, the Iowa Electronic Markets are branching out beyond presidential politics.

The University of Iowa College of Business project, in which traders use real money to measure candidates' chances, has had a strong predictive track record since it started in 1988.

The IEM has added three Congressional markets. In the first two, traders can buy and sell contracts that will predict whether the Democrats will gain seats in each of the Senate and House, maintain its current number of seats, or lose seats to the Republicans.

In the third market, traders can buy and sell contracts based on overall control of Congress: Democratic or Republican control of both houses or split control.

A fourth new market looks at Minnesota's U.S. Senate race between Republican incumbent Norm Coleman and the Democratic challenger, comedian Al Franken.

The IEM has two presidential election markets: a winner-take-all market and a percentage market. The winner-take-all market predicts odds of victory. The vote share market predicts the margin of victory, and pays out based on that percentage; a 55 percent share yields 55 cents.

Recent trading in the winner-take-all market predicts an Obama victory is 60 percent likely. Trading has been very light in the vote share market, but the most recent trades indicate that the margin will be within two percent.

No comments: