IEM Traders Favor Probability of Republican House of Representatives
Traders on The University of Iowa’s real money Iowa Electronic Markets believe control of the U.S. House of Representatives is a toss-up after this fall’s midterm Congressional elections.
As of Tuesday morning, a Republican House-Democrat Senate contract was trading for 42.9 cents on the IEM’s Congressional Control market, which means traders believe there is a 42.9 percent probability that the Republicans will take control of the House. A Democrat House-Democrat Senate contract was selling for 42.3 cents, which means traders believe there is a 42.3 percent chance that Democrats will maintain control of both houses.
While the prices are still close, the contract for a Democratic sweep of both houses of Congress had been the highest priced contract on the market since it opened in November. The contract has lost almost half its value, however, and in recent days was overtaken by the Republican House contract by a few tenths of a cent.
A contract for a GOP sweep was selling for 14 cents, also near its high.
Meanwhile, on the House Control market, the contract representing a loss of control by the Democrats was selling for 56.8 cents.
On the IEM’s Florida Senate seat race, investors believe Charlie Crist is the most probable winner. A Crist contract was selling for 59 cents, meaning the market believes he has a 59 percent probability of winning the election. Republican candidate Marco Rubio’s contract is selling for 42.3 cents, while Democrat Kendrick Meek’s contract is selling for 6.6 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.
The IEM can be found online at tippie.uiowa.edu/iem. Current prices/probabilities can be viewed online at iemweb.biz.uiowa.edu/quotes/Congress10_quotes.html.
Data on the Florida Senate market is online at iemweb.biz.uiowa.edu/quotes/348.html.
Contact: Tom Snee, UI News Services, 319-384-0010