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IEM Traders Peg Congressional Elections a Toss-Up

The likelihood of the Democrats holding onto Congress after November's mid-term elections is now just slightly better than a coin toss, according to traders on the Iowa Electronic Markets (IEM).

As of this morning, contracts on the IEM's Congressional Control Market for a Democratic House and Democratic Senate were trading for 55.5 cents. That price means traders believe there is a 55.5 percent probability that the Democrats will remain in control of both chambers in the next session of Congress.

Sunday's passage of the health care reform bill had little impact on the market, as prices for that contract have been stable in recent weeks, drifting only between 52 cents and 56 cents. The contract sold for 80.5 cents when the market opened Dec. 1.

The next likeliest possibility is a Republican controlled House and Democratic Senate, according to the market. The price on that contract was trading for 22.3 cents Monday morning.

While traders believe Republicans have a roughly even chance of taking a chamber, they give a slim probability to a sweep. The contract for a Republican House and Republican Senate was selling for only 15.5 cents Monday morning.

The probability of a Democratic House and Republican Senate was set at only 3.5 percent.

The Iowa Electronic Markets is a real-money political futures prediction market operated by the University of Iowa's Tippie College of Business. 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.

Current prices, prospectuses and information on opening an account can be found online at tippie.uiowa.edu/iem.


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