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Traders Give Edge to Obama, Democrats, Franken on IEM's Election Markets

Last night's final presidential debate did little to change the price dynamic between the contenders on the Iowa Electronic Markets election markets, as Barack Obama's contract is still trading at prices considerably higher than John McCain's.

As of 8 a.m. Thursday, a contract for Obama was selling for 85.8 cents on the IEM's Winner Take All market, which means traders believe there is an 85.8 percent probability Obama will win next month's popular vote.

A McCain contract, meanwhile, was selling for 14.6 cents.

On Oct. 1, Obama's contract on the Winner Take All was selling for 69.8 cents and McCain for 30.9 cents. After that, Obama's price slowly increased -- and McCain's decreased -- until Oct. 9, when the contracts settled into the 85-15 price spread that's been maintained since.

Trading has been heavy, with more than 8,000 contracts trading hands Wednesday.

The value of an Obama contract on the IEM's Vote Share market, meanwhile, was selling for 58 cents, which means traders believe Obama will receive 58 percent of the two-party popular vote. A McCain contract on the Vote Share market was selling for 46.6 cents.

Traders also overwhelmingly believe the Democrats will not only maintain their control of Congress, but increase their majorities in both houses. The contract for Democratic control on the IEM's Congressional Control market was selling for 94.2 cents Thursday morning, which means traders believe there is a 94.2 percent probability that Democrats will maintain both chambers.

Traders also believe there is a 95.5 percent chance the Democrats will increase their majority in the House of Representatives and a 97.2 percent probability they will increase their majority in the Senate.

Finally, on the IEM's third market for this year's election, traders believe comedian and actor Al Franken has a higher probability of winning the U.S. Senate seat from Minnesota than incumbent Norm Coleman. Franken's contract is trading for 76.6 cents on the Winner-Take-All market, which means traders believe there is a 76.6 percent chance Franken will win.

Coleman's contract is trading for 28 cents, while independent candidate Dean Barkley's contract is trading for less than 1 cent.

On the Vote Share market, a Franken contract is trading for 56.6 cents, which means traders believe he will receive 56.6 percent of the Minnesota vote. A contract for Coleman is trading for 43.4 cents, and Barkley is trading at 11.9 cents.

The Iowa Electronic Markets is operated by the UI'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.

The IEM can be found online at tippie.uiowa.edu/iem>.

The latest presidential market price quotes can be found at iemweb.biz.uiowa.edu/quotes/Pres08_quotes.html.


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