CONTACT: GEORGE MCCRORY
100 Old Public Library
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: May 22, 2000
Iowa Electronic Markets (IEM) opens trading for Mexican presidential race
IOWA CITY, Iowa Traders in the Iowa Electronic Markets (IEM) can now
buy and sell shares in the prospects of candidates in the hotly contested
Mexican presidential race.
Professors at the Henry B. Tippie College of Business at the University
of Iowa have opened web-based trading in political futures markets at http://www.biz.uiowa.edu/iem/markets/mexico00.html.
Traders can buy share contracts in Partido Accion Nacional (PAN) candidate
Vicente Fox, Partido de la Revolucion Democratica (PRD) candidate Cuauhtemoc
Cardenas, Partido Revolucionario Institucional (PRI) candidate Francisco Labastida,
or a contract for other qualified candidates.
The IEM is a small-scale, real- money market used as a teaching and research
laboratory. For an investment of as little as $5 or as much as $500 in U.S.
dollars, trading is open to participants worldwide.
In the IEM's vote share market, prices should predict the vote share candidates
will receive. Payoffs on a candidate's contract will be $1 times the share
of the popular vote that the candidate receives. For instance, the Vicente
Fox PAN contract as of May 22 is at 48 cents, which indicates that IEM traders
think that Fox will garner 48 percent of the vote, compared to 41 cents or
41 percent for PRI candidate Francisco Labastida. Cardenas PRD contracts are
at 7 cents or 7 percent of the vote, and "rest of field" contracts
are at 5 cents or 5 percent.
UI IEM directors, with assistance from Duke University Professor Emerson
Niou and Duke political science graduate students Liz Zechmeister and Guillermo
Rosas, set up the market to show students and others how markets operate.
It's also an experiment to observe how the markets react to a three-party
"We'd like to use the data generated by the markets to explore fluctuations
in the strength of the candidates throughout the last two months of the race.
In the meantime, it's a lot of fun to watch the values of the contracts vacillate
as new traders join and old traders react to campaign events and news,"
Jose Pagan, associate professor of economics at University of Texas-Pan American,
encouraged the IEM directors at the UI to set up this market. He will use
it in his economics classes, where many of the students are Mexican nationals.
The University of Texas-Pan American in Edinburg, Texas has an 83.7 percent
Hispanic enrollment and is a short distance from the Mexican border.
"This market will be of interest to most of my students. It's a very
close race, and I hear news about it every day." Pagan said. "The
IEM is showing that the PRI and PAN candidates are basically even. It's also
more objective than opinion polls."
Since 1929, the PRI candidates have won all of Mexico's presidential elections,
but Fox and his PAN party are making a strong run at the office this year,
winning support as he campaigns in advance of the July 2 election.
Since its beginning with the 1988 U.S. Presidential election, the IEM has
established a reputation for forecasting election results with great accuracy.
The IEM's predictions of vote shares in the last three U.S. presidential elections
have had an error of less than 1 percent. In addition to the current U.S.
presidential and congressional elections, the UI professors have also conducted
markets for several elections around the world, including the recent Taiwan
The IEM has 6,000 registered traders worldwide with a total equity of about
$130,000; more traders are expected to log on as the election season continues.
For more information, see the Iowa Electronic Markets website at http://www.biz.uiowa.edu/iem
or contact the IEM office at (319) 335-0881 or (319) 335-0794