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Marketing Class Uses Futures Market To Predict Bond Film Box Office Success

Will the latest James Bond adventure "Die Another Day" sink or swim in the box office? So far, a University of Iowa marketing class thinks it will likely make more than $120 million, and students are buying futures contracts in the Iowa Electronic Markets (IEM) to back up their predictions.

Tom Gruca, associate professor of marketing at the UI, is using the IEM to help his MBA marketing management class gain practical experience in marketing analysis and financial trading. The IEM is a real-money, web-based market, trading in futures contracts whose eventual payoff depends on the movies' four-week box office receipts as measured by AC Nielsen EDI. Trading in "Die Another Day" contracts began Nov. 8 .

To make their forecasts about the movies' success, students conduct research using many sources including information from movie industry web sites, looking at past performance of similar movies, critics' reviews and expected performance of competing movies released in the same time period in previous years.

After completing their research, the MBA students use $5 accounts supplied by the Henry B. Tippie School of Management to buy futures contacts based on their projections of the movie's box office receipts in the first four weeks of release, Nov. 22 to Dec. 19. Futures contracts are for box office receipts of $0-$90 million, $90-$100 million, $100-$110 million, $110-120 million, and $120 million or more. If the trader correctly predicts the box office totals and purchases a contract that reflects their opinion as of Dec. 19, the payoff is $1 per contract; other contracts expire worthless in this winner-take-all-market.

"Students get a lot of assignments doing analysis or defending their recommendations from a case study. But with the IEM, they are making decisions and taking action in a market with a real dollar payoff. It completes the cycle of business decision-making," he said. Students like the IEM because it prepares them for their careers in marketing and finance, Gruca said.

The IEM movie market isn't open to the general public; it's for classroom use and open to traders with an academic affiliation.

Since 1995, Gruca has conducted markets on 16 movies with students from the UI MBA program and other schools throughout the country. His movie choices are based on their probable appeal to college students who trade in the IEM.

Started in 1988, the IEM is a teaching and research laboratory at the UI Tippie College of Business. Six faculty at the Tippie College have conducted several other political and business markets, including markets for the 2000 presidential elections, Senate races, and Republican or Democratic control of the two houses of Congress.

For more information, see the Iowa Electronic Market website or contact Gruca at (319) 335-0946.


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