Iowa Electronic Markets Opens Trading on New York City Mayoral Race
Traders can buy contracts in Democratic nominee (currently Mark Green, based on unofficial runoff vote counts) or Republican nominee Michael Bloomberg in the market, which is run by six professors at the Henry B. Tippie College of Business at the University of Iowa.
In this winner-takes-all market, contract payoffs will be $1 if the Democratic nominee wins in the Nov. 7 election, $1 in the Republican nominee is elected, or $1 if another candidate is declared the winner. Thus, prices predict each nominee's chances of election.
The markets opened Oct. 3, with traders initially favoring Green, whose contract is trading at about 80 cents, which means the traders believe he has an 80 percent chance of winning the election; Bloomberg contracts are at 20 cents or a 20 percent chance of election. Contacts for "other" candidates were trading at less than a penny.
The IEM is a real-money market used as a teaching and research laboratory. For an investment of as little as $5 or as much as $500, trading in the markets is open to participants world-wide. The IEM also has opened a new futures market on the federal funds rate target for public trading; a similar market was only open to academic traders previously.
Throughout the 2000 elections, the IEM conducted markets in the presidential race, the New York Senate race, and Republican or Democratic control of the two houses of Congress. During the 2000 presidential elections, the IEM had 7,600 traders and more than $240,000 in equity.
For more information, see the Iowa Electronic Markets website at tippie.uiowa.edu/iem> or contact the IEM office at (319) 335-0881.
Contact: George McCrory, UI News Service, 319-384-0012