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University of Iowa News Release

 

Oct. 13, 2010

Iowa Electronic Markets sees increasing likelihood of GOP sweep

Traders on the Iowa Electronic Markets now overwhelmingly believe Republicans will take over at least one house of Congress in next month’s mid-term elections, with an increasing likelihood of a sweep.

As of Wednesday morning, the contract on the IEM’s Congressional Control Market representing a GOP sweep of the Senate and House of Representatives was selling at 31.7 cents, which means traders believe the Republicans have a 31.7 percent probability of taking over Congress. That price is up from 22 cents just two weeks ago.

The market says the most probable outcome of the election is still a Republican House-Democratic Senate. That contract is selling for 54.6 cents, representing a 54.6 percent probability of a split Congress. The price is down from 61 cents at the start of the month, as traders sell contracts in favor of outright Republican control.

The contract for continued Democratic control of both houses is selling for only 13.1 cents. That contract sold for 80 cents when the market opened last fall, so any trader who purchased it then would lose 67 cents per contract if they sold today.

Trading has been moderate on the Congressional Control Market recently, with more than 500 contracts traded most days this month.

The Iowa Electronic Markets is operated by the University of Iowa’s Tippie College of Business as a real-money futures prediction market that allows traders invest up to $500. Begun in 1988, the IEM is a research and teaching tool that has achieved an impressive prediction record, substantially superior to alternative mechanisms such as opinion polls. Such markets have been significantly more accurate than traditional tools in predicting outcomes ranging from political election results to movie box office receipts.

The IEM can be found online at http://www.biz.uiowa.edu/iem. Current prices/probabilities can be viewed online at http://iemweb.biz.uiowa.edu/quotes/Congress10_quotes.html.

STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500

MEDIA CONTACTS: Joyce Berg, director, Iowa Electronic Market, 319-335-0840, joyce-berg@uiowa.edu; Tom Snee, University News Services, 319-384-0010 (office), 319-541-8434 (cell), tom-snee@uiowa.edu