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McCain Gains, Romney Takes Lead on IEM

John McCain is gaining fast on the Iowa Electronic Markets' tumultuous Republican nomination market, just one week before the Iowa caucuses kick off the 2008 presidential nominating process.

IEM investors have also pushed Mitt Romney past Rudy Giuliani for the lead on the Republican market.

The price of a McCain contract on the IEM was trading at 19.8 cents as of 9 a.m. CST Thursday, 11 cents higher than it was just three weeks earlier. The price means that IEM investors believe there is a 19.8 percent probability that McCain will be the Republican Party's nominee for president.

The price had reached 20 cents Wednesday before falling back slightly. He recently passed Mike Huckabee for third place on the market and is gaining fast on Giuliani and new leader Romney.

Giuliani's contracts had been trading for the highest price on the Republican nomination market since July but they have slipped dramatically in the last month. From a peak of 41.7 cents on Nov. 26, his contract has fallen to 26.6 cents this morning. The price of a Romney contract, meanwhile, has jumped to 28.4 cents.

The Iowa Electronic Markets is operated by the University of Iowa's Tippie College of Business as a real-money futures prediction market. Begun in 1988, the IEM is a research and teaching tool that has achieved an impressive prediction record, substantially superior to alternative mechanisms such as opinion polls. Such markets have been significantly more accurate than traditional tools in predicting outcomes ranging from political election results to movie box office receipts.

McCain's IEM surge comes after he received the endorsement of the Manchester Union Leader, New Hampshire's largest newspaper, and public opinion polls that show he is gaining fast in the Granite State. McCain also won the New Hampshire primary in 2000. New Hampshire primary voters go to the polls Jan. 8, five days after the Iowa caucuses on Jan. 3.

Prices of other contracts on the Republican market include Mike Huckabee at 16 cents, Fred Thompson at 4.2 cents and Rest of Field at 7.2 cents.

On the Democratic nomination market, Hillary Clinton continues to hold a commanding lead. Clinton contracts were trading at 63.7 cents Thursday morning, meaning investors believe there is a 63.7 percent probability she will be the Democratic Party's nominee. Barack Obama contracts were trading at 28.5 cents and John Edwards contracts traded at 7.9 cents. The Democratic Rest of Field contract was trading at 2 cents.

Contracts for the nomination markets will pay off after the winning candidates are officially nominated at the two parties' conventions next summer.


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