May 3, 2010
Six months out, IEM probability is a Democratic Congress with fewer seats
With six months to go before the mid-term Congressional elections, the University of Iowa’s real-money Iowa Electronic Markets show a likelihood that the Democrats will control both chambers, but with diminished majorities.
As of 9 a.m. (Central Time) Monday, May 3, the price of the Democrat Senate and Democratic House contract on the IEM’s Congressional Control market was trading at 58.2 cents, meaning traders believe there is a 58.2 percent probability the Democrats will hold both houses.
The price of a Republican House-Democratic Senate contract traded at 28.7 cents. The contract for Republican control of both houses was trading at 11.5 cents and a Democratic House and Republican Senate traded for 1.5 cents.
While the market indicates Democrats will retain control of Congress, prices indicate the likelihood of a smaller majority is strong. Traders give a 58.7 percent probability of lost seats, with a 42.5 percent probability that the Republicans will take the majority.
In the Senate, the markets believe there is an 84.5 percent probability of a smaller Democratic majority, with a 13.5 percent likelihood of a Republican takeover.
More than 2,600 contracts were traded on the Congressional Control market during April.
The Iowa Electronic Markets is a real-money political futures prediction market operated by the University of Iowa’s Tippie College of Business. Begun in 1988, the IEM is a research and teaching tool that has achieved an impressive prediction record, substantially superior to alternative mechanisms such as opinion polls. Such markets have been significantly more accurate than traditional tools in predicting outcomes ranging from political election results to movie box office receipts.
Current prices, prospectuses and information on opening an account can be found online at http://www.tippie.uiowa.edu/iem.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500.
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