imaufo
24-01-2008, 11:32
IF YOU HAVEN'T HEARD of the Iowa Electronic Markets (IEM) yet, you probably will soon, for one reason alone: this year's hotly contested presidential election. Forget the polls, which shift from day to day based on who frowned or sighed the most during the latest debate. Since its inception in 1988, the IEM has predicted the outcome of the presidential elections more accurately than 76% of the polls it follows, according to its own research.
There are several good reasons for that, says Thomas Rietz, associate professor of finance at the University of Iowa and a board member of the IEM. One of the biggest, he says, is enlightened self-interest (also known as greed). While there's nothing stopping a poll respondent from bending the truth, he says, "Our traders are putting their money on the line with their forecasts."
Traders can invest up to $500 in any individual futures market on the IEM, a rule designed to limit the influence of any single individual.
The details of how the IEM works are pretty complicated — you can learn more on its Web site. What's important is what it's telling us now about who will win the U.S. presidency on Nov. 2. As of Thursday morning, Bush led Kerry by about four percentage points in the IEM's Presidential Vote Share market, which represents a bet on the percentage of the popular vote each candidate will receive. In the Winner-Takes-All market, a bet on who will win the popular vote, Bush's lead is greater, at 56 cents to 44 cents, as of Oct. 6 (the winner gets $1 for each contract, hence winner-takes-all). That represents a 24% fall-off for Bush, however, since he peaked at 74 cents on Sept. 27, just before the first presidential debate.
http://www.smartmoney.com/theproshop/index.cfm?story=20041007
There are several good reasons for that, says Thomas Rietz, associate professor of finance at the University of Iowa and a board member of the IEM. One of the biggest, he says, is enlightened self-interest (also known as greed). While there's nothing stopping a poll respondent from bending the truth, he says, "Our traders are putting their money on the line with their forecasts."
Traders can invest up to $500 in any individual futures market on the IEM, a rule designed to limit the influence of any single individual.
The details of how the IEM works are pretty complicated — you can learn more on its Web site. What's important is what it's telling us now about who will win the U.S. presidency on Nov. 2. As of Thursday morning, Bush led Kerry by about four percentage points in the IEM's Presidential Vote Share market, which represents a bet on the percentage of the popular vote each candidate will receive. In the Winner-Takes-All market, a bet on who will win the popular vote, Bush's lead is greater, at 56 cents to 44 cents, as of Oct. 6 (the winner gets $1 for each contract, hence winner-takes-all). That represents a 24% fall-off for Bush, however, since he peaked at 74 cents on Sept. 27, just before the first presidential debate.
http://www.smartmoney.com/theproshop/index.cfm?story=20041007