Bloc Quebecois Eroding Conservative Hopes for Majority: UBC Election Stock Market

With the Canadian federal election a week away, trading on the Election Stock Market at the University of British Columbia shows that increasing support for the Bloc Quebecois may erode Conservative hopes for a majority government.

Following the English- and French-language leaders’ debates last week, a major shift in momentum has occurred, says Werner Antweiler, Co-Director of the UBC Election Stock Market (UBC-ESM).

The UBC-ESM is an online, real-time market where traders invest their own funds to buy and sell financial contracts representing political parties. It has provided accurate predictions of final vote and seat shares, including predictions within a few seats of the 2006, 2000 and 1997 federal elections.

Antweiler compares the average trade prices during the three days before the debates with the average trade prices during the three days after the debates. He says the probability of a Conservative majority has fallen from 38 per cent to 30.4 per cent, and the probability of another minority government has risen from 59.7 per cent to 67.1 per cent.

“The gap between a majority and a minority government has widened by 15 percentage points after the debates,” says Antweiler, a professor at UBC’s Sauder School of Business. “Earlier today, this gap continued to widen. The contract for a conservative majority was trading at 20 cents, and the contract for a minority government at 80 cents.”

UBC-ESM traders invest their own funds to buy and sell financial contracts representing the political parties, and in addition, bear the risk of losing money as well as earning profits. The minimum investment required to open an account is $25, and the maximum amount that may be invested is $1,000 per account.

The market currently has 230 traders, with a total of more than $60,000 invested. Four markets are currently operating on this federal election: a  “Seats Market,” a “Popular Vote Market,” a “Plurality Market”, and a  “Majority Government Market.”

In the Seats Market, where traders predict the distribution of seats in the House of Commons, shares for the Bloc rose from 11.7 before the debates to 13.7 cents after the debates. This indicates a predicted shift of six to seven seats in parliament.

“Our traders seem to believe that the Bloc is consolidating its base in Quebec, to the disadvantage of the Conservative Party in closely fought ridings,” says Antweiler.

Trading activity rose sharply last Friday, following the English-language leaders debate on Thursday.

“Prices in the UBC Election Stock Market are clearly on the move,” adds Antweiler. “The big surprise is that the French language leaders’ debate appears to have had a more significant effect than the English language debate.”

Sauder School of Business operates the UBC-ESM as a research and teaching tool on market and trader behaviour. There are no commissions or surcharges and at the close of the market, the UBC-ESM pays out the total money invested to the penny.

Individual traders will earn profits or bear losses depending upon whether the final values of their portfolios exceed or are lower than their initial investments.

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