Iowa Electronic Markets
The IEM is an on-line futures market where contract payoffs are based on real-world events such as political outcomes, companies’ earnings per share (EPS), and stock price returns. The market is operated by University of Iowa Henry B. Tippie College of Business faculty as an educational and research project.
People are betting their actual dollars on the outcomes of political elections. Further explanation:
If a candidate’s chances at victory are looking good to traders, the cost of a futures contract bearing that candidate’s name or party goes up as high as one dollar. If a share bearing a candidate’s name is selling at 55 cents, it means market traders give the candidate a 55 percent chance at victory.
The “winner take all” markets are reflective of the market’s prediction of the popular vote. As of today (Oct 13, 2008), Barack Obama is running away with the presidential race (over John McCain) and Al Franken is running away with the Minnesota senate race (over Norm Coleman).
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