Newswise — The opening bell has rung for the 2016 Iowa Electronic Markets’ presidential and Congressional control markets that give traders the opportunity to buy and sell contracts that will predict the results of the next general election.
The new markets include:
--Presidential Vote Share market that predicts what percentage of the two-party popular vote the Democratic and Republican nominees will receive
--Presidential Winner Take All market that predicts which of the nominees will win the overall popular vote
--Congressional Control market that predicts which party will control which chamber of Congress.
A real money futures market operated by the University of Iowa’s Tippie College of Business, the IEM gives traders the opportunity to buy and sell contracts based on what they think the outcome of a future event will be. Contracts for the correct outcome pay off at $1, all other contracts pay off at zero. As a result, the price of the contract at any given time is the probability that the traders believe that event will happen. Traders can invest up to $500 in the market.
Traders on the recently closed 2014 Congressional Control market first saw the emergence of a potential GOP sweep in summer 2013. The market opened in December 2012 with traders initially favoring the contract for a status quo Congress—Republican House, Democratic Senate—for the first year. But the contract representing a GOP sweep started to trend upward in the summer of 2013 and then emerged as the most likely outcome in December 2013—11 months before Election Day—when the price of the contract for a GOP sweep passed the price of the contract representing a status quo Congress. Except for a few scattered days of trading, it remained the most likely outcome for the rest of the campaign, crossing the 50 cent threshold in August and continuing to trend upward until the election.
A chart showing the IEM prices during the life of the 2016 Congressional Control market can be found at https://iemweb.biz.uiowa.edu/graphs/graph_Congress14_flash.cfm.
More information on the IEM—including information on opening a trading account—is available at http://tippie.uiowa.edu/iem/markets/. Current presidential market price quotes can be found at https://iemweb.biz.uiowa.edu/quotes/Pres16_quotes.html and Congressional control market quotes can be found at https://iemweb.biz.uiowa.edu/quotes/Congress16_quotes.html.
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