IEM Trading Analyzed

For some time, pundits have been predicting the House majority will go to the Democrats and the Senate will remain in Republican hands after Election Day votes are cast. Prices on political markets run by the Iowa Electronic Markets -- a UNIVERSITY OF IOWA marketplace where people bet on election winners -- seemed to be pointing in this split direction. Until this past Friday, traders didn't believe it with great certainty. The exchange gave heavy odds to bets on a Democratic House. It also gave heavy odds on a Republican Senate. But it showed that the odds of both a Democratic House and a Republican Senate were a little less than 50%. In other words, traders were betting some sort of surprise would prevent the exact split the pundits expected. Over the weekend, however, some of the uncertainty about the election appears to have been cleared up. With the latest round of polls confirming the prospects of a divided Congress, the odds of the Democrats and Republicans splitting the House and Senate rose to about 60% on the Iowa market. As the picture about the final outcome has become clearer, investors have become happier.

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