Political Traders: Can't Get Enough of That Hillary Stuff
Posted February 3, 2008 | 05:36 PM (EST)
by Clark Merrefield...The Iowa Electronic Markets, founded by the University of Iowa in 1988, are real-money markets that deal with predicting future events. More succinctly put, the IEM are futures markets. Within the IEM there are several different markets, and conceptually they work something like the Dow Jones stock market. For example, in the Democratic nomination market, a buyer may purchase shares - called contracts in the IEM parlance - in the candidate she thinks is most likely to win the nomination. Or, the buyer may purchase shares in a candidate whose price is low but she thinks will go up.
"The IEM has generally outperformed the major national polls
, and has been more accurate than those polls even months in advance of the actual election," James Surowiecki wrote in The Wisdom of Crowds. "If a candidate's contract costs 50 cents, it means, roughly speaking, that the market thinks he has a 50 percent chance of winning."
...The IEM political market for the Democratic nomination currently prices Clinton at about 60 cents. Obama is at 37 cents. So it would seem the market is leaning strongly in favor of a Clinton nomination. The polls, as shown above, give the impression of a still tight race....
More: http://www.huffingtonpost.com/nycity-news-service/political-traders-cant-_b_84699.html 
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