Wednesday, August 08, 2007

More Bad News

A friend emailed more bad news on the Obama front. The Iowa Electronic Market is essentially a betting pool where people invest money ($5 to $500) and predict outcomes on various elections. The thinking here is that people don't have any incentive to tell pollsters who they're actually going to vote for, but if they're putting their money down, they do it on the candidate they think will win. They tend to be more accurate than polls at predicting outcomes. When money's on the line, people tend to ignore intangibles and focus on real data, like jobs reports, Iraq news, and so on.
Run by the university's business school and regulated by the Commodity Futures Trading Commission, the Iowa market has spawned similar futures markets at and, and they have been remarkably prophetic. Compared with 596 national polls in four presidential election cycles between 1988 and 2000, the Iowa market was closest to the actual election result 76 percent of the time notes Thomas Rietz, a finance professor at the University of Iowa and director of the Iowa futures market.

Indeed, early on in the 2000 White House race, the polls put George W. Bush as the clear winner, but the Iowa futures market predicted a dead heat as early as May that year, Rietz said.

So who do participants like in Iowa? Hillary, by a steady margin:

(DROF is any other Democratic candidate. For the Edwards campaign, this is bad indeed--he's consistently trailing DROF in these markets. Oy.)

If there's any good news, it's that IEM participants can only base their bets on current, actual data. Since Obama is still untested and somewhat unknown, the data will continue to be volatile. Campaign and real-world events can shape what people think about the candidates, altering their view of who will win. But still, it's further evidence that the Senator from Illinois has some work left to do.

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