July 18, 2011
GOP sweep of Congress given early edge by Iowa Electronic Market traders
The Iowa Electronic Markets' (IEM) 2012 Congressional Control prediction market has opened, and early trading gives the highest probability to a Republican sweep of both chambers of Congress.
As of 9 a.m. on Monday, July 18, the contract for Republican control of both the Senate and House of Representatives was selling for 44.5 cents, which means traders believe there is a 44.5 percent probability of Republicans taking both houses.
Traders give a 21.1 percent probability to the status quo, with Republicans holding the House and Democrats the Senate. A Democratic House and Republican Senate is an 18.2 percent probability and a Democratic sweep is a 17.8 percent probability.
The market, operated by researchers in the University of Iowa Tippie College of Business, opened on July 15.
Payoffs will be determined based on the popular election results of the 2012 general election. Contracts for the candidate who receives the most popular votes pay $1; losing contracts pay nothing. This payoff structure means that IEM prices reflect the probability of each candidate's winning the nomination.
The trading market, contract prospectuses and registration information can be found on the IEM 2012 U.S. Presidential Election Markets website at: http://tippie.uiowa.edu/iem/markets/congress12.html.
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.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500.
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