NewsHour Features UI's Political Prediction Market

The PBS NewsHour will profile the Iowa Electronic Markets (IEM) tonight as part of a feature looking at alternative ways to forecast an election.

The IEM, operated by the University of Iowa Tippie College of Business, is a political prediction market in which buyers and sellers trade contracts using real money to predict who will win an election. It operates in a way that’s similar to any futures market, only instead of buying and selling contracts based on the future price of wheat or pork bellies or light sweet crude, the political markets use election outcomes.

The IEM is operating five markets for the current election: a Winner Take All market to predict which presidential candidate will win the popular vote; a Vote Share market to predict what percentage of the vote the two major party candidates will receive; and three Congressional Control markets to predict which party will control the next Congress.

As of this morning on the Winner Take All market, Barack Obama contracts are selling for 65.5 cents, which means the IEM’s traders believe Obama has a 65.5 percent probability of winning the popular vote. Contracts for Romney are selling for 35.5 cents, which means the market believes he has a 35.5 percent probability of winning the popular vote.

The NewsHour feature includes an interview with Joyce Berg, IEM director and professor of accounting in the Tippie College of Business.