I don't get it. What is this graph? thnx
I don't get it. What is this graph?
The graph shows prices for Bush and Kerry on the Iowa electronic market. The market is a real money market where the share of the winner pays of $1.00. Historically, the price on the market right before the election has been closer to the actual results than any poll.
The current prices to buy and sell are
Symbol Bid Ask
DEM04 0.426 0.429
REP04 0.572 0.588
Using the mid point of the price spread, the current forecast is Bush 58% Kerry 42.7 (if you could sell them both for more than 100, you lock in a profit).
Both Iowa electronic markets and Tradesports are futures markets where people can bet on outcomes. If you knew for certain that you would get a dollar on an outcome, it's fair price would be $1.00. If Bush shows at 60 cents, that mean that the consensus of investor/bettors are evaluating his chances at 60% (and putting up money).