CONTACT: GEORGE MCCRORY
100 Old Public Library
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: Oct. 4, 2000
Iowa Electronic Markets remain mostly unfazed by presidential debates
IOWA CITY, Iowa -- Traders in the Iowa Electronic Markets (IEM) were largely
unfazed by yesterday's presidential debates, with prices remaining mostly
unchanged in early trading Wednesday.
It's still a very close presidential race in the IEM, the University of
Iowa's real-money market where traders buy and sell political futures. Current
market prices show Al Gore at 49.5 cents and Bush at 48.8 cents in the vote
share market, where the payoffs will be based on the popular vote received
by the Democratic, Reform, and Republican nominees in the presidential election.
Reform Party shares are at 2 cents. In this market, prices can be seen as
predicting the percentage of the vote each candidate will receive.
However, the IEM also has a "winner-take-all" market where the
winning contract will pay $1, while the others will expire worthless. Thus,
prices predict each candidate's chances of winning the nomination. In this
market, IEM traders favor Gore, whose price is at 63.4 cents and Bush at 36.4
cents. Prices shifted a bit in post-debate trading with Gore shares gaining
a cent after the debates, while Bush shares dropped 3 cents.
With prices remaining largely unchanged, traders didn't glean any new information
from the debates to change their preferences, said Tom Rietz, UI associate
professor of finance and IEM co-director. At this point, IEM predicts a Gore
win, but by a very tight margin.
"The debates may have reinforced people's current opinion about the
candidates," Rietz added.
Forrest Nelson, UI economics professor and IEM co-director, said the price
of Gore shares rose by 2 cents on Monday in the winner-take-all market, suggesting
that IEM traders anticipated a slight edge to Gore before the debate. "Apparently
they were not disappointed, since Gore's price edged up another two cents
by midnight on Tuesday. Those price changes were small, however, and trading
volume was up only slightly. All of that suggests the debate produced no surprises
and no clear winner," Nelson 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 world-wide.
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
for the latest prices.
For more information on the IEM, contact Jeanine Alcocer, IEM Operations
Manager at (319) 335-0794.