STOCK markets are better than pollsters at predicting the results of
elections, according to American researchers. They even predicted a dead heat
between Bush and Gore in the presidential election a year ago鈥攗nlike
almost every opinion poll.
In the past four US presidential elections Thomas Rietz and his colleagues at
the University of Iowa have set up a futures market in which players have a
financial stake in predicting the result of the election. Traders buy shares in
the candidate they think will win, which they can cash in when the contest is
over.
Rietz says the predictions of the markets consistently beat the pollsters. He
believes the market has a 鈥渃ollective intelligence鈥�, because by following the
candidates鈥� prices, players are able to react continuously to what everyone else
thinks. 鈥淎s new information comes in, traders adjust incredibly fast,鈥� he
says.
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However, Nick Sparrow of the British polling company ICM Research is doubtful
whether a market approach will take over from polling. He points out, for
example, that the investors use polls to make their judgements.