UBC Reports | Vol. 46 | No. 17 | November 2, 2000

Market takes stock of federal battle for power

Traders in Commerce's Election Stock Market have a knack for predicting who'll get the most votes

With nearly two weeks since the federal election call, politicians working the campaign trail may want to keep an eye on UBC's Web-based Election Stock Market (UBC-ESM) for an indicator of how their party will fare when the votes are tallied on Nov. 27.

"At predicting seat shares and popular votes share, the market has been very good," says Commerce and Business Administration Prof. Tom Ross who, along with colleague Prof. Werner Antweiler, serves as a director of the election market.

The pair has organized and operated election markets during the 1993 and 1997 federal elections as well as the 1996 provincial election.

In fact, during the 1997 federal election, the UBC-ESM did a better job of predicting the popular vote among the parties than two of the nation's major pollsters. That year, the market came out ahead of May 30th polls conducted by Gallup and Angus Reid, placing behind only the Environics poll.

"Our traders certainly use poll information to guide their investments, but by being more forward-looking than polls can be, they can often generate more accurate predictions," says Ross. "Overall, this is a bunch of regular folks scattered across the country with no particular political expertise who have done very well at predicting election outcomes."

The UBC-ESM provides an opportunity for people to learn how financial markets work by buying stock in the political fortunes of the Liberals, Canadian Alliance, Conservatives, New Democrats and Bloc Québécois.

It is made up of three distinct markets: popular vote, share of seats and a majority government market.

This year's market, sponsored by the National Post, opened on Oct. 9 and has already attracted more traders than each of the previous three markets.

Earlier this week, the market was predicting the Liberals would have 40.5 per cent of the popular vote and 51 per cent of the seats followed by the Canadian Alliance with 31 per cent of the seats.

In 1993, 250 traders participated while 100 people traded in a market shortened by technical constraints in 1997. During the 1996 B.C. provincial election, 100 traders played the market. This year, there are active participants in every province and even a few traders in the U.S.

Registered traders use their Web browser to log into their trader account and check market prices and the account information needed to carry out trades. Markets are also opened for a B.C. provincial election expected before next June. No commissions or other fees are charged to traders.

"As in other financial markets, you make money by `buying low and selling high,'" says Ross. "While the market is operating, traders will earn profits by selling contracts at prices higher than they paid for them and lose when they sell for less than the prices paid."

Individual traders may receive back more or less than they invested, depending upon how well they predicted the election outcomes. Contracts or shares will earn post-election dividends, or liquidation values, which depend on the outcome of the election.

more information

For complete information about how to invest, hours of operation, trading, market quotes, liquidation values, and registration, visit esm.ubc.ca.