Iowa Electronic Markets continue to show tight presidential race
The IEM, the University of Iowa's real-money market where traders buy and sell political futures, show Al Gore with a narrow lead at 50.2 cents and George W. Bush at 49.8 cents after Tuesday's debate. In this vote share market, prices can be seen as predicting the percentage of the vote each candidate will receive.
"This race is very tight -- surprisingly tight compared to other races the IEM has tracked," said Tom Rietz, UI associate professor of finance and IEM co-director.
The IEM also operates a "winner-take-all" market where prices predict each candidate's chances of winning the nomination rather than the size of the victory. In this market, IEM traders currently favor Gore, whose price is at 50 cents while Bush's price is at 48 cents. But prices in this market can fluctuate rapidly with new information, such as campaign news or other events.
After the second debate, Bush shares rallied in the winner-take-all market, recovering from a 31-cent low Oct. 5 and climbing to 52.9 cents on Monday to overtake Gore, whose shares had dropped 47.6 cents from a 68-cent high on Oct. 5. However, IEM traders seemed to give Gore a slight edge in the third debate, with his shares up about three cents and Bush shares retreating three cents.
Rietz says the Bush surge over the past two weeks might be attributed to traders being influenced by two events -- recent troubles in the Mideast and a downturn in the stock market. Rietz will be watching to see if the market continues its slide and its impact on the IEM, as the fortunes of the incumbent party are frequently tied to prosperity.
"Since Oct. 5, the S&P 500 has been down about 4 percent, (not counting what happens today) while Gore contracts have been down 40 percent in the IEM winner-take-all market," Rietz said.
The IEM has forecasted election results with great accuracy, tracking the Democratic and Republican vote shares in the last three presidential elections within an average of less than
2 percent. The IEM has 7,000 traders and more than $175,000 in equity. For an investment of as little as $5 or as much as $500, trading in the markets is open to participants worldwide.
Six faculty members at the University of Iowa Tippie College of Business operate the markets as a research and teaching tool. See the markets online at http:/tippie.uiowa.edu/iem/ for the latest prices.
For more information on the IEM, contact Jeanine Alcocer, IEM Operations Manager at (319) 335-0794.
Contact: George McCrory, UI News Service, 319-384-0012