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IEM Traders Give Edge to Obama, Democrats, While Franken Price Dips

In the final days of the 2008 campaign, traders on the Iowa Electronic Markets continue to favor Barack Obama and Congressional Democrats to win next week's general elections, while Al Franken's price is dropping fast in Minnesota.

As of 8 a.m. CT Thursday, a contract for Obama was selling for 85 cents on the IEM's Winner Take All market, while a contract for John McCain was selling for 15.3 cents. The numbers mean that IEM traders believe there is an 85 percent probability that Obama will win the popular vote on Tuesday, while McCain has a 15.3 percent probability of winning.

The 85-15 price spread has been largely unchanged for about three weeks. Trading has been heavy in recent days, with more than 7,700 contracts trading hands Wednesday.

On the IEM's presidential Vote Share market, Obama's contract was selling at 54.7 cents, while McCain's was selling at 47 cents. Those figures mean that traders believe Obama will receive 54.7 percent of the two-party popular vote, while McCain will receive 47 percent.

On the Minnesota Senate market, traders give Democrat Al Franken a 53.4 percent chance of defeating incumbent Republican Norm Coleman, who has a 49.9 percent chance of winning re-election. Those numbers, however, are significantly tighter than they were just two days ago; Franken's contract was trading at 72.5 cents on Tuesday, while Coleman's was at 32.4 cents.

Finally, on the IEM's Congressional Control markets, Democrats are being given a 96.1 percent chance of maintaining control of both chambers of Congress. House Democrats have a 98.8 percent probability of adding to their majority and Senate Democrats a 97.5 percent probability of adding to theirs.

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


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