CONTACT: GEORGE MCCRORY
100 Old Public Library
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: Aug. 17, 1999
Straw Poll has little effect on Iowa Electronic Markets
IOWA CITY, Iowa The outcome of Saturdays
Iowa Straw Poll has had little immediate effect on the going price for shares
for Republican candidates in the Iowa Electronic Markets (IEM) with share
prices for Texas Gov. George W. Bush remaining stable and showing that he
retains a commanding lead in the race for the GOP nomination for President.
Based on IEM trading in past U.S. elections, polls tend
to have little effect on market prices, according to Robert Forsythe, a professor
of economics and Senior Associate Dean in the University of Iowa Henry B.
Tippie College of Business. This means that traders find little, if any, new
information in polling numbers. But a candidate unexpectedly dropping out
of the race will affect share prices as will any other event that surprises
traders, he said.
"The vast majority of campaign events seem to be anticipated
by traders. Over the course of a campaign, there are usually only a handful
of events that move the market," said Forsythe, one of the UI business professors
who oversees the IEM.
As of Tuesday, share prices for Bush remained mostly
unchanged at 74 cents, but shares for second-place finisher Steve Forbes nudged
up two cents to 9 cents from 7 cents last week. Shares of former Vice President
Dan Quayle have dropped to nearly zero at .003 cents, while Elizabeth Dole
shares remain in the three-to-four-cent range.
However, shares in a rest-of-field contract dropped
from 15 cents last week to 10 cents Tuesday, with traders reacting to Lamar
Alexander's withdrawal from the race. Traders have not seen any other viable
candidates in the rest of the pack, Forsythe said. The rest-of-field contract
includes other candidates such as Gary Bauer or Pat Buchanan who are not listed
among the front-runners in the IEM field.
The Iowa Electronic Markets are web-based political
futures markets at http://www.biz.uiowa.edu/iem
run by professors in the Tippie College of Business. Although the Iowa Straw
Poll is over, political enthusiasts may buy shares in candidates they think
will be the Republican nominee for president. For as little as $5 or as much
as $500, IEM traders buy contracts in a candidate at prevailing market price.
Winning contracts pay $1; losing contracts pay nothing. The IEM also has markets
for the Democratic presidential nomination, the New York Senate race and congressional
Started in 1988 at the UI, the IEM was developed as
a way to teach students about commodities futures markets and permit detailed
studies of how those markets operate. The IEM has forecasted election results
with great accuracy, tracking the vote totals of winning candidates of the
last two presidential elections within two-tenths of a percentage point.
After the Straw Poll on Saturday the IEM had some
of its highest activity in the last two months. But Forsythe expects even
more activity later this month when more than 100 colleges and universities
around the country start using the IEM in their classes. In the 1996 presidential
markets, UI business professors managed 7,000 accounts with a total equity
of more than $200,000.
For more information, contact IEM operations office
at (319) 335-0794 or Forsythe at (319) 335-0865.
Detailed trading information can be found in the IEM website at http://www.biz.uiowa.edu/iem/