News & Events

Romney Still Favorite on Iowa Electronic Markets Despite South Carolina Loss

The Republican nomination has been thrown into doubt the last few days, but traders on the Iowa Electronic Markets still think Mitt Romney is the most probable nominee.

Romney's contract was trading for 71.6 cents on the IEM's GOP nomination market Monday morning, which means traders believe there is a 71.6 percent probability he will win the party's nomination despite being thumped in Saturday's South Carolina primary.

The price of a contract for Newt Gingrich, who won handily in South Carolina, was selling for 18.1 cents.

Romney's price had been selling for as high as 91.5 cents in the last week, while Gingrich's was as low as 4.1 cents before a series of events upset the nomination process in the days leading up to the primary. Still, Rick Perry's withdrawal from the race, a dust-up involving Romney's refusal to release his tax returns and a charge that Gingrich asked one of his ex-wives for an open marriage wasn't enough to shake traders' belief that Romney has the probabilities in his favor.

Meanwhile, the price of the Rest of Field contract—which represents Rick Santorum—was selling for 4 cents Monday morning, and Ron Paul's contract was selling for 2.4 cents.

A real money futures market operated by the University of Iowa's Tippie College of Business, the IEM gives traders from around the world the opportunity to buy and sell contracts based on what they think the outcome of a future event will be. Contracts for the correct outcome pay off at $1, all other contracts pay off at zero. As a result, the price of the contract at any given time is the probability that the traders believe that event will happen. Traders can invest up to $500 in the market.

The latest prices on the GOP Convention market are available online at iemweb.biz.uiowa.edu/quotes/356.html. More information on the IEM is available at tippie.uiowa.edu/iem/markets.

 

 


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