News & Events

IEM Offering Shares for November Congressional Elections

With the 2006 mid-term Congressional election campaign in its final weeks, the Iowa Electronic Markets (IEM) is open for trading to predict which party will control Congress.

The IEM is a real-money market where traders buy and sell political futures based on what they think the results of the elections will be. The contracts the market is offering this year include the following:

  • Republicans maintain control of both the House of Representatives and the Senate;
  • Republicans maintain control of the House of Representatives, Democrats take control of the Senate;
  • Republicans maintain control of the Senate, Democrats take control of the House of Representatives;
  • Democrats take control of both the Senate and the House of Representatives.
During trading Monday morning, investors believed there was a 39 percent probability of Republicans controlling both chambers after the Nov. 7 election, a 42 percent probability of a Democratic House and Republican Senate, a 12.5 percent probability of Democrats controlling both chambers, and a 6.5 percent probability of a Republican House and a Democratic Senate.

Additional markets allow investors to buy shares based on each party gaining seats, losing seats, or maintaining the same number of seats in each chamber of Congress. The Congressional election markets opened June 1 and more than 1,200 accounts have been established to trade, said Joyce Berg, IEM co-director and professor of accounting in the University of Iowa's Henry B. Tippie College of Business. Those traders have invested more than $17,000 in the current markets, with more than $141,000 waiting to be invested.

The IEM has also opened a market with an early look at the 2008 presidential election in which participants trade shares based on which party they believe will win the majority of the two-party popular vote for the White House. As of Monday morning, traders believed there was a 60 percent probability of the Democratic ticket winning the White House.

Accounts on the Iowa Electronic Markets can be opened for as little as $5 and as much as $500. The markets are open to the public, and anyone can trade contracts in a candidate of choice. There are no commissions; traders just mail a check and an application to the IEM at the Tippie College of Business to open an account.

Started in 1988, the IEM was developed as a research and teaching tool to teach students the intricacies of the financials markets and permits detailed studies of how markets operate. The IEM has forecasted election results with great accuracy because the premise behind the IEM is that when traders have money on the line, there's an incentive to think hard about their beliefs and trade accordingly.


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