August 14, 2012 | By University Communication and Marketing
The price of a contract representing Mitt Romney’s winning the popular vote in November has fallen more than 5 percent on the IEM’s Winner Take All market since he named Ryan as his vice presidential candidate Saturday morning. His contract had been trading for 41.3 cents before the nomination was announced, but more than 2 cents to 38.9 cents Tuesday morning.
The Tuesday price means the market believes Romney has a 38.9 percent chance of winning the popular vote in November.
Meanwhile, the price of a contract for Obama winning the popular vote has gone up 1.5 cents in the three days since Ryan’s appointment, from 59 cents to 60.5 cents Tuesday morning.
Obama’s contract saw similar gains on the IEM’s Vote Share market, which predicts the percentage of the popular vote that each candidate will receive. Obama’s price has jumped from 53.2 to 54 cents since Saturday, which means the market believes Obama will receive 54 percent of the vote between the two candidates.
Romney’s contract has fallen a full penny since Saturday, from 48.9 to 47.9 cents.
Trading volume has been moderate, with 1,154 Romney contracts trading hands on Saturday, but only 10 Obama contracts. A total of 2,724 contracts have been traded in the days following.
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 general election market prices are available at iemweb.biz.uiowa.edu/quotes/Pres12_quotes.html. More information on the IEM—including information on opening a trading account—is available at tippie.uiowa.edu/iem/markets.
Contact: Tom Snee, UI News Services, 319-384-0010