The Iowa Electronic Markets were created as an academic research tool to study how markets process information. Instead of trading stocks or currencies, participants trade contracts linked to real-world events such as election results, economic indicators, or policy decisions. Because traders use their own money—though in small amounts—the market reflects genuine expectations, not hypothetical guesses.
IEM markets operate similarly to prediction markets. Contract prices represent the market’s estimate of the probability of an event. For example, a contract trading at 0.65 may imply a 65% chance that the event will occur. These markets are limited in scale and regulated to operate strictly for educational and research purposes, not for commercial profit.
Researchers value the IEM because it often produces accurate forecasts. The market aggregates information from many participants, who each react to news and data as it becomes available. This collective decision-making helps economists study how expectations form, how information spreads, and how markets respond to uncertainty.
The Iowa Electronic Markets help researchers analyze how prediction markets work and how well markets forecast real-world outcomes. They offer insight into collective behavior, expectations, and decision-making.
IEM contracts typically focus on political elections, policy decisions, and economic indicators. Examples include U.S. presidential election outcomes, party control of Congress, or economic forecasts such as inflation or GDP growth. Each contract issues payouts based on the actual outcome, making prices reflect real-time expectations. The set of available markets changes based on academic goals.
Participants trade with real money and respond quickly to new information, which helps markets reflect collective expectations accurately. Prices adjust as news, polls, or events shift the outlook. Historically, the IEM has produced forecasts that rival or outperform traditional polling methods. Its accuracy stems from the market’s ability to combine many independent views into a single probability estimate.
The IEM operates under special regulatory approval that limits investment amounts and restricts participation to educational and research purposes. Commercial markets allow larger stakes and broader access. While both systems operate on the same principles, the IEM is specifically designed for academic study and data analysis, not widespread trading or profit-making.
During a U.S. presidential election cycle, IEM participants trade contracts that pay out if a specific candidate wins. As debates, polls, and news events unfold, contract prices shift to reflect updated expectations about the outcome.
FinFeedAPI’s Prediction Market API provides price and contract data similar to those used in research-focused markets like the IEM, helping users analyze event-based probabilities and build forecasting tools.
