It's Obama and McCain

The online traders were right on the money last week in Iowa, and for tomorrow's New Hampshire primary they've given the Illinois senator a 90 percent chance of winning. Hillary Clinton has an 8.7 percent chance, according to futures contracts at Intrade. Before Iowa, traders had only given Obama a 34 percent chance. On the Republican side, McCain has an 83 percent chance of winning, while odds on Mitt Romney stood at 17.7 percent. From Bloomberg:

Contract prices on Intrade reflect the odds of a candidate winning and are all-or-nothing wagers. A contract showing a 50 percent chance a candidate will win the New Hampshire primary, for example, would cost $5 and would pay $10. If the candidate doesn't win, it would settle at zero. On the Iowa Electronic Markets, run by the business school at the University of Iowa in Iowa City, Obama's chances of winning the nomination jumped to 66 percent, according to yesterday's closing prices, from 47 percent on Jan. 3. Clinton's chances dropped to 32 percent from 51 percent.

As crazy as it sounds, markets have proven to be a fairly reliable predictor of election outcomes. "If you think momentum effects are important, you can predict them today in markets. It's the dynamic aspect that is most important," says Justin Wolfers, a Wharton School professor. The oddsmakers’ results in Iowa were especially striking because it was the first presidential contest and not everyone had expected Obama’s strong showing.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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