A stock market at the UBC Sauder School of Business is aiming to predict the outcome of Canada’s upcoming federal election.
The only election stock market in Canada, the UBC Sauder School of Business Prediction Markets allow investors to use their own money to buy and sell “shares” representing political parties, with those who predict correctly reaping the financial rewards after the polls close on Oct. 21, 2019.
As of Oct. 15, the Prediction Markets show the Liberals and Conservatives neck-and-neck in seat shares, with the Liberals holding 131 seats and the Conservatives with 133 seats. Consistent with the seat share prediction, the plurality market predicts an almost equal chance of whether Liberals or Conservatives receive the most seats, and the majority government market predicts a three-in-four chance of a hung parliament.
The UBC Sauder School of Business Prediction Markets were launched in January 2013 as the successor to the UBC Election Stock Market, which operated from 1993 to 2008.
According to the market’s developer Werner Antweiler, UBC Sauder associate professor, election stock markets are forward-looking in nature as traders look at developing trends and shifts, unlike traditional opinion polls that take a snapshot of sentiment during the last few days.
“When people invest their own money, prediction results are often more reliable because investors tend to let go of their biases and analyze events more carefully in order to maximize returns,” he said. “While many traders follow polling trends, other investors take contrarian views and benefit if they are right.”
The platform currently has four markets running, predicting percentage of popular vote for five major political parties (or all others) in this year’s election, seat share for each party in parliament, whether a party wins a plurality of seats, and whether a party will form a majority government.
In previous election markets, traders seemed particularly adept at predicting seat distributions. This could be due, in part, to investors’ ability to draw on multiple sources such as debates, news coverage, polls and pundits, said Antweiler.
The Prediction Market is run on a not-for-profit basis and is an important tool for teaching and research, since it can provide important insight into the dynamics of futures market trading. The markets are open to Canadian residents over the age of 19 who can invest a minimum of $25 and up to a maximum of $1,000 per person.