Monday, April 21, 2008

IEM investors still believe Obama will be Democratic nominee

Barack Obama continues to hold a significant lead over Hillary Clinton on the University of Iowa's Iowa Electronic Markets' (IEM) Democratic Nomination Market Monday, the eve of the Pennsylvania primary.

As of 9 a.m. CDT Monday, Obama's contracts were selling for 75 cents, which means IEM investors believe there is a 75 percent probability that Obama will be the Democratic presidential nominee. Meanwhile, a contract for Clinton was selling at 21 cents.

Obama has held a significant lead on the Democratic nomination market since the day after February's Super Tuesday elections, when Clinton announced she was loaning her campaign $5 million. Since then, the price of an Obama contract has reached as high as 85 cents, while Clinton's contracts have touched as low as 11 cents.

More than 1.65 million contracts have changed hands on the IEM's two nomination markets since trading began in March 2007.

Meanwhile, on the IEM's Presidential Election Winner Take All market, investors still give the edge to whoever the Democratic nominee is in the race against presumptive Republican nominee John McCain. As of 9 a.m. Monday, a contract for the Democratic nominee was trading at 54 cents, meaning investors believe there is a 54 percent probability the Democratic candidate will win the popular vote count in the November general election. A contract for the Republican nominee -- presumably McCain -- was trading at 45.5 cents.

The Iowa Electronic Markets is a real-money political futures prediction market operated by professors in the University of Iowa's Tippie College of Business. 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.

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