July 30, 2004 | Dow Jones NewswireTwo months ago, when ICAP Energy and the New York Mercantile Exchange launched derivatives that allowed traders to bet each week on the outcome of the U.S. Department of Energy's natural gas storage survey, reactions from energy analysts and traders were at best mixed, but the market proved to be an accurate indicator. Similar markets in other arenas are uncannily accurate. Take the Iowa Electronic Markets, which 76 percent of the time since 1988 has done a better job than opinion polls of predicting the outcome of presidential elections (on Thursday, the market had Bush and Kerry in a dead heat). Participants in the market, who essentially place bets on which candidate will win, may not be representative of typical voters. They may not even vote. But that doesn't matter. "We've found that our markets tend to predict election outcomes better than polls," said JOYCE BERG, an associate professor at the Tippie College of Business at the University of Iowa and a director of the program. "In surveys and polls, people don't have an explicit requirement to be accurate and honest," she explained. "In a market, people express strength of belief."
Contact: Joyce Berg