Sept. 5, 2008
IEM traders unmoved by conventions' festivities
After two weeks of convention speeches, rallies, confetti, and fireworks, vice presidential selections, a hurricane and various and sundry controversies, traders on the Iowa Electronic Markets said, "eh."
Prices on the IEM's presidential election markets are pretty much in the same place where they started two weeks ago. As of 9 a.m. CT Friday, the morning after the Republican National Convention wrapped, a contract for Barack Obama was trading for 58.5 cents on the IEM's Winner Take All market. A contract for John McCain was trading for 41.9 cents.
The figures mean that investors on the IEM believe Obama has a 58.5 percent probability of winning the popular vote in November's general election, while McCain has a 41.9 percent probability.
Those prices are largely unchanged from prices on Monday, Aug. 25, the day the Democratic Convention opened. Prices that morning were 60 cents for Obama and 40.1 cents for McCain.
The IEM is a real-money futures market in which traders can invest up to $500 to buy and sell contracts based on which candidate they think will win. Opened in 1988, the IEM is a research and teaching tool operated by professors at the University of Iowa's Tippie College of Business that examines how markets operate and seeks to understand their value as a predictive tool.
The IEM has operated markets in every presidential election since 1988 and a study earlier this year showed it to be more successful at predicting winners than 74 percent of the public opinion polls conducted during that time.
Prices on the IEM's Vote Share market showed slightly more movement than on the Winner Take All market. On Obama contract was trading for 53.9 cents Friday, which means traders believe he will get 53.9 percent of the popular vote. That's up 1.1 cents from the 52.8 cents he was trading for last Monday.
McCain, meanwhile, was trading at 47.1 cents Friday, down more than 2 cents from the 49.5 percent he was trading at when the DNC started.
In other IEM political markets, investors believe it's overwhelmingly likely that the Democrats will expand their margin of control in Congress. A Democratic House-Democratic Senate on the Congressional Control market was selling of 95.2 cents Friday morning, which means investors believe there is a 95.2 percent probability that the Democrats will control both chambers in the next Congressional term.
A Democratic House-Republican Senate contract was selling for 2.8 cents, while the Republican House-Democratic Senate and Republican House-Republican Senate contracts were selling for less than 1 cent each.
On the House of Representatives Control market, prices are 90.5 cents for the Democrats gaining seats, 9.6 cents for no change in seats, and 1.3 cents for the Republicans gaining seats.
On the Senate Control market, prices are 92.3 cents for the Democrats gaining seats, 3 cents for no change in seats, and 1.3 for the Republicans gaining seats.
Finally, on the Minnesota Senate market, investors believe there is a 61.6 percent probability that incumbent Republican Norm Coleman will hold onto his seat against the Democratic challenger, comedian and actor Al Franken. The probability of a Franken victory was set at 38.2 cents.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Suite 371, Iowa City, Iowa 52242-2500.
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