Market predicted slim squeaker for Liberals

by Stephen Forgacs
Staff writer

Twenty hours before the last federal election polling station closed its doors
on June 2, traders on UBC’s Election Stock Market (UBC-ESM) had already predicted
the Liberal party’s slim majority bang on.

And traders on the UBC-ESM did a better job of predicting distribution of
the popular vote among the parties than two of the major pollsters. The market
came out ahead of polls conducted by Gallup and Angus Reid on May 30, being
bested only by the Environics poll.

The seats market, which traded based on the projected number of seats to be
won by the major parties or others, predicted the Liberals would win 154 seats
(51 per cent of seats) while the Globe and Mail newspaper predicted 172 to 179
seats on May 31. The Liberals ended up with 155 seats, or 51.5 per cent.

The market was a bit off with the other parties, however, with traders on
the seats market showing too much confidence in the Progressive Conservatives
(27 seats predicted/20 seats actual), and too little in the New Democratic Party
(15 predicted/21 actual). Similarly, the Bloc Quebecois did better than market
predictions (36 predicted/44 actual) and Reform did worse (66 predicted/60 actual).

“In general I’m quite pleased with how the market did. But it has to be kept
in mind that the market was much smaller this time than in 1993 because of a
late start,” said Commerce and Business Administration Prof. Tom Ross, who with
colleague Prof. Werner Antweiler serves as a director of the market. About 100
traders participated in the market– just enough, said Ross, to allow for relatively
accurate predictions. The traders invested about $23,000.

As a research project, the UBC-ESM generates valuable data that will provide
insights into market and trader behaviour.

Traders on the market in 1993 also predicted the final outcome of popular
vote in the federal election with great accuracy, although few were able to
predict the extent of the Liberal sweep.

UBC-ESM also operated three markets during the 1996 B.C. provincial election.

Typically, three markets are operated: the Seats Market, which trades based
on the projected number of seats to be won by the major parties or others; the
Vote Market, which trades on the percentage of popular vote each party is likely
to win; and the Majority Government Market, which trades on the likelihood of
any party winning a majority.

The UBC-ESM is a fully computerized market with no brokers or other intermediaries.
Registered traders log into their market accounts from their own computer terminals
to check market prices or account information and extend offers to buy or sell.
No commissions or other fees are charged to traders.