November 29, 2011 | By UI News Services
Newt Gingrich is now the Republican candidate most likely to finish in the top two in next year's Iowa caucus, as the price of his contract on the Iowa Electronic Markets' Iowa Caucus market has jumped more than 22,000 percent in six weeks.
Gingrich's contract was trading for 69.1 cents on the Iowa Electronic Market's Iowa Caucus market Tuesday morning, which means the market believes he has a 69.1 percent probability of finishing in the top two in January's GOP caucus. His contract had been selling for as little as .3 cents—less than a penny—as recently as Oct. 13.
Meanwhile, the price of Mitt Romney's contract has fallen 31 percent in the past two weeks and was trading at 60.5 cents Tuesday morning, which means the market believes he has a 60.5 percent probability of being among the top two in the caucus. Romney's contract had been selling for as high as 87.4 cents as recently as Nov. 13.
The price of Gingrich's contract jumped 13 cents between Monday morning and Tuesday morning, while Romney's contract fell by 8 cents in the same time period.
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.
Other contract prices on the IEM's Iowa Caucus Market Tuesday morning were Ron Paul at 42 cents, Rick Perry at 8.5 cents and Michele Bachmann at 2.1 cents. Herman Cain's contract was trading at 10.1 cents, largely unchanged by Monday's accusations that he had engaged in an extramarital affair.
The Rest of Field contract—which includes any candidate for whom there is no individual contract—was selling at 2.8 cents Tuesday morning.
Contact: Tom Snee, UI News Services, 319-384-0010