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Opinion

Trading Bush-Gore futures

Want to find out who the financial markets think will be the next US president but don't have the time to pore through a forest's worth of research? Take a look at the futures exchange dedicated to tracking just that.


The Iowa Electronic Markets is an online exchange set up in 1988 by the University of Iowa Henry B Tippie School of Business as a research aid for students. It has since become so accurate a forecasting tool that investment banks defer to it with some reverence. Merrill Lynch has used it in its analysis of several US elections and Barclays Capital's chief US economist Henry Willmore cites it as a good indicator of the likely outcome of the Bush-Gore race.


The IEM offers a number of markets, including those based on likely company EPS results and stock price returns, but it is their political markets which are best known, and the only ones open to non-students.


There are two markets for the presidential election: a winner-takes-all market, where only those backing the winner get a payout; and a vote share market, by which winnings are calculated according to the percentage of the popular vote each candidate gets.




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