Last forecast based on the Iowa Electronic Markets (IEM): 46.7% (03 November 2008).

Prediction Markets like the IEM provide highly accurate forecasts of election outcomes. For more information on prediction markets, visit marketsforforecasting.com.

Comparing market forecasts with 964 election polls for the five US presidential elections from 1988 to 2004, Berg et al. (2008) showed that the IEM outperformed the polls 74% of the time.

Our forecast is the combined rolling average of the closing prices of the Iowa Electronic Markets vote-share prices for the last 7 days. By calculating weekly averages, we adjust for short-term overreactions of the market that might occur due to informational cascades. As shown by Cuzán, Armstrong & Jones (2005), calculating weekly averages of IEM market prices reduced forecast error in the 2004 election.

This forecast is incorporated in the Pollyvote with a weighting of 25%.

* On May 1, the IEM forecast was pushed to an unreasonably high value of 74% for the Republican two-party vote. Although the market quickly reacted to this by showing a bid-ask spread of 47.5 to 53.9, the market still showed this flawed value until May 5 since no new trade occurred. Thus, for the time period from May 1 to 5, we manually adjusted the IEM forecasts by reporting the mean of the bid-ask spread (50.7%)