News & Events

IEM Traders Increasingly Favor GOP in Mid-Term Congressional Elections

With two months to go before the fall midterm Congressional elections, the Iowa Electronic Markets is showing trouble for Democrats.

As of Friday morning, IEM traders are giving a high probability of the likelihood that Republicans will take at least one chamber of Congress, and maybe an outright sweep. The cost of the Republican House-Democratic Senate contract was selling for 59.7 cents on the IEM’s Congressional Control Market, meaning traders believe there is a 59.7 percent probability that the Republicans will take control of the House of Representatives in the next session of Congress.

More disconcerting for the Democrats is that the contract representing a GOP sweep of both houses was selling for 24.9 cents. The price of that contract had been trading for months in the 11- to 13-cent range, but has roughly doubled since mid-August.

Meanwhile, the cost of a contract representing continued Democratic control of Congress was down to 18.5 cents. When the Congressional Control Market opened last November, the contract was selling for 80 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.


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