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Gaming Guru

Rod Smith
 

Bettors Predict Schwarzenegger Will Win Easily

8 October 2003

CALIFORNIA -- If you believe the betting public, body-builder-turned-action-hero-turned-politician Arnold Schwarzenegger is pretty much a shoo-in to replace Gray Davis as California governor in today's recall election.

Futures players using the Iowa Electronic Market are betting almost six-to-one Davis will be recalled and about 10-to-one Schwarzenegger will be picked to succeed him.

Buyers are predicting the recall will succeed by a margin of 55 percent to 45 percent and that Schwarzenegger will garner an incredible 87 percent of the vote on the second ballot, compared with a vote of 9 percent for Lt. Gov. Cruz Bustamante, each with a margin of error of plus or minus 3 percent.

No local casinos contacted Monday by the Review-Journal had posted odds on the California recall election, nor had other popular online gaming sites.

In the last week before the election, 2,700 individuals have bought futures contracts, or wagered legally, on the election's outcome at the Iowa Electronic Market. By comparison, 48,000 wagered on the 2000 presidential election in the last week, 49,000 on the 1996 presidential election and 60,000 on the 1992 election.

Interest has been small compared with other major elections, even though it may have been on a par with the average gubernatorial election, said University of Iowa finance professor Tom Rietz.

The average margin of error on Iowa Electronics Markets, a nonprofit Web site operated by faculty at the University of Iowa Tippie College of Business, has been 3 percent since the site was founded in 1988, and is lower than many public opinion surveys' margins of error.

The fundamental reason for the accuracy is that people tend to be more thoughtful when "they're putting their money where their mouths are," Rietz said.

The market also tends to attract people who are genuinely interested in politics and are, therefore, more likely to make informed decisions, he said.

The Iowa Electronic Markets are real-money futures markets for traders to buy and sell contracts predicting the outcome of elections in the United States.

The actual payouts to futures buyers will be based on the outcome of today's election and how the votes cast affect several individual futures contracts. For instance, in addition to betting on whether Davis will lose the first half of the ballot initiative, buyers were able to speculate whether the recall election would be canceled.

The Web site is www.biz.uiowa.edu/iem/