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University of Iowa News Release

 

Oct. 25, 2011

IEM gives hope to GOP afterthoughts

Take heart, GOP presidential candidates not named Mitt Romney. John McCain's price on the Iowa Electronic Markets four years ago today might provide you with some measure of hope.

McCain's contract was selling for only 7.1 cents on the Iowa Electronic Markets' Republican convention market on Oct. 24, 2007, which means traders believed on that date he had only a 7.1 percent probability of winning the party's nomination. His price did not start trending up until the first week of December, and he didn't become the most probable candidate until his price hit 29.6 cents on Jan. 1, 2008.

Traders believed four years ago today that the candidate with the highest probability of winning the nomination was Rudy Giuliani, whose contract was selling for 40.1 cents.

Romney was trading for 30.2 cents four years ago. This morning, his contract is selling at 68.4 cents, which means traders believe there's a 68.4 percent probability that he will win the nomination.

Other contracts selling on the GOP convention market today include Rick Perry at 11.5 cents, Michele Bachmann at 3.4 cents and Ron Paul, at 1.4 cents. The markets' Rest of Field contract, which includes anyone for whom there is no individual contract selling on the market, was selling at 15.5 cents.

A real money futures market operated by the University of Iowa's Tippie College of Business, the IEM gives traders the opportunity to buy and sell contracts based on what they think the outcome of a future event will be. Contracts for the correct outcome pay off at $1, all other contracts pay off at zero. As a result, the price of the contract at any given time is the probability that the traders believe that event will happen. Traders can invest up to $500 in the market.

The latest prices on the GOP Convention market are available online at http://iemweb.biz.uiowa.edu/quotes/356.html. More information on the IEM is available at http://tippie.uiowa.edu/iem/markets/.

STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500

MEDIA CONTACT: Tom Snee, 319-384-0010 (office), 319-541-8434 (cell), tom-snee@uiowa.edu