IEM Election Day Trading Noted

Right up through election day, Carleton College political science professor Stephen Schier tracked the performance of the IOWA ELECTRONIC MARKETS. This is an on-line teaching tool developed by faculty members at the University of Iowa's Henry Tippie College of Business to show how markets work. Registrants could play the futures market by buying or selling vote-share contracts for John Kerry or President Bush. The market calculated the overall demand for one candidate over the other. If one of them got 32.4 percent of the votes in the market, his contract would be worth 32.4 cents. Since June, Bush almost always led. His contract leaped to around 75 cents just before the first debate, but by the eve of the election it had fallen to about 52 cents. On Tuesday afternoon, Bush's contract crashed, plunging to below 30 cents as John Kerry's contract shot above 70. Traders were acting on early exit polls, which pointed to a win for Kerry.