CONTACT: GEORGE MCCRORY
300 Plaza Centre One
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: Oct. 25, 2001
Marketing students test analysis skills, trade futures in electronic movie
CITY, Iowa Using the Iowa Electronic Markets (IEM), marketing students
at the University of Iowa and Winona State University will be speculating
on the box-office success of two highly anticipated pre-holiday movies, "Monsters,
Inc." and "Harry Potter and the Sorcerer's Stone."
Tom Gruca, associate professor of marketing at UI, will use the online technology
of the IEM to help his MBA marketing management class gain practical experience
in marketing analysis and financial trading. Gruca's students will trade in
the "Harry Potter" market, while students in an undergraduate marketing
class at Winona State University in Minnesota will trade in the "Monsters,
The IEM is a real money, web-based market, trading in futures contracts where
eventual payoff depends on the movies' four-week box office receipts as measured
by AC Nielsen EDI.
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, critic's reviews and expected performance
of competing movies released in the same time period in previous years.
"They gather information and integrate it into single forecast, and
then implement an investment strategy based on that forecast," Gruca
explained. "Forecasting a movie's success is a very challenging application
of their marketing analysis skills."
Trading began Oct. 19 in the "Monsters, Inc." market at http://www.biz.uiowa.edu/iem/markets/movie_MINC.html,
and is based on box office receipts in the first four weeks of release, from
Nov. 2 to Nov. 29. Futures contracts are for box office receipts of $0-$120
million, $120-$140 million, $140-$160 million, $160-$180 million, and $180
million or more. If the trader predicts correctly the box office totals and
purchases a contract that reflects their opinion as of Nov. 29, the payoff
is $1 per contract; other contracts expire worthless in this winner- take-all
market. The Winona State students use $5 accounts with funds supplied to the
IEM by a National Science Foundation grant intended to promote economic literacy
at colleges serving minority and rural populations.
So far, IEM traders think "Monsters, Inc." will make around $150
Trading in the UI class will begin Nov. 2 on the "Harry Potter and the
Sorcerer's Stone" market at http://www.biz.uiowa.edu/iem/markets/movie_HPS.html,
and will be based on box office receipts from Nov. 16 to Dec. 13. The IEM
will offer five future contracts for five box office receipts ranging from
$0 to $220 million or more. The UI MBA students will trade using $5 accounts
supplied by the Tippie School of Management.
"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 markets are for classroom use and are open only to traders
with academic affiliation.
"We have several second-year MBAs who used the IEM in last year's marketing
management class, and they are eager to trade," Gruca added.
Since 1995 Gruca has conducted markets on 14 movies with students from the
University of Iowa 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, the New York Senate race, and Republican or Democratic
control of the two houses of Congress. During the 2000 presidential elections,
the IEM had 7,600 traders and more than $240,000 in equity.
The IEM also has opened a market on the New York mayoral race and a new futures
market on the federal funds rate target, which are both open to all traders;
a similar market on the Fed Funds rate was only open to academic traders previously.
For more information, see the Iowa Electronic Market website at http://www.biz.uiowa.edu/iem
or contact Gruca at (319) 335-0946.