With the Canadian federal election less than two weeks away,
prices on the UBC Election Stock Market (UBC-ESM) indicate
a turn in voter support in favour of the Conservatives over
the Liberals.
“When the market opened on December 13, it signaled
a Liberal minority government outcome, with 40 per cent of
the seats — and the Conservatives with roughly 35 per cent
of the seats,” says Prof. Tom Ross, Director of the
Phelps Centre for the Study of Government and Business and
Co-Director of the UBC-ESM. The ESM currently has more than
215 traders, with a total of more than $52,000 invested.
“Over the past two weeks, the trend has reversed this
prediction. Present share prices predict a Conservative victory
with 40 per cent of the seats and the Liberals in the low
thirties. Perhaps most striking, is that the market now believes
that there is a 20 per cent chance of a Conservative majority
government when, as recently as January 1, neither the Liberals
nor the Conservatives were given even a six per cent chance
of earning a majority.”
High volumes of trading activity on the Election Stock Market
suggest increasing interest as the election approaches. “We
saw a dramatic increase in trading activity on January 9th,
with trading volumes breaking a new record for this election
— in fact volumes were several times higher than they had
been, which is likely a result of traders adjusting their
portfolios in response to the leaders’ debate,”
adds Ross.
The UBC-ESM is an online, real-time market where the “shares”
(or contracts) being traded are based on the outcome of an
election, and has operated during several federal and provincial
elections since 1993. Past UBC-ESMs have provided accurate
predictions of final vote and seat shares, within a few seats
of the 2005 B.C. Provincial Election and 2000 and 1997 Federal
Elections.
Participants in the stock market 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. Three markets are currently operating
on this federal election: a “Seats Market”, a
“Popular Vote Market”, and a “Majority Government
Market.”
The UBC-ESM operates on a not-for-profit basis, with the
results of the market contributing to research and teaching
at UBC on market and trader behaviour. The minimum investment
required to open an account is $25, and the maximum amount
that may be invested is $1,000 per account.
At the close of the market, participants’ portfolios
are purchased by the UBC-ESM at prices determined by the election
results. 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.
PLEASE NOTE: The Election Stock Market will
close on January 22, 2005 at 11 p.m. PST. To open an account
or to watch the results, visit http://esm.ubc.ca.
More UBC-ESM information and a trader’s manual are available
from this site.
The Sauder School of Business at the University of British
Columbia is Canada’s leading academic business school.
Recognized globally for its contributions to management practice
through innovative research and teaching, the school is dedicated
to opening worlds of opportunities for its students, alumni
and associated communities.
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