Sept. 15, 2010
Big moves on IEM after Tuesday’s Tea Party success
The probability of a Republican sweep of Congress took a big hit on the Iowa Electronic Markets after Tuesday’s primary elections, but traders believe a Republican takeover of the House of Representatives is even more likely.
The likelihood that the Democrats will hold onto both chambers also jumped on the real-money IEM’s Congressional Control market as a result of the elections.
As of 8 a.m. Wednesday, the contract representing a Republican takeover of both the Senate and House of Representatives after this November’s elections was selling for 16.3 cents, which means traders believe there’s a 16.3 percent probability of a GOP sweep. That price is a 34 percent drop from the 24.6 cents the contract was trading for Tuesday afternoon.
Meanwhile, a contract representing a Republican House-Democratic Senate was trading for 57.4 cents Wednesday, a 12 percent increase over the 51.1 cents it was trading at Tuesday afternoon.
The price of a contract representing continued Democratic control of both chambers jumped from 21.8 cents Tuesday to 24.3 cents Wednesday morning.
The significant change in prices came as the result of primary elections that saw Tea Party-affiliated candidates defeat more moderate candidates in closely watched Republican Senate primary elections in Delaware and New York.
Volume was heavy on Tuesday, with nearly 1,000 contracts trading hands.
The Iowa Electronic Markets is operated by the University of Iowa’s Tippie College of Business as a real-money futures prediction market. 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.
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