Directors: Thomas Ross and Werner Antweiler
What is the UBC Election Stock Market?
The UBC-ESM is an exchange in which traders buy and sell financial contracts representing political parties participating in real elections. This year the exchange includes three markets involving the expected 1997 Canadian Federal Election. In the first, the Seats Market, six contracts are traded, one representing each of the major parties plus a final contract covering all others. Those contracts are identified as follows:
CA97S.LIB -- Liberal Party
CA97S.BQ -- Bloc Quebecois
CA97S.REF -- Reform Party
CA97S.NDP -- New Democratic Party
CA97S.PC -- Progressive Conservative Party
CA97S.OT -- Others
The second market operated by the UBC-ESM is the Majority Government Market. There are three contracts in this market corresponding to a Liberal majority government (CA97M.LIB); and a "catch-all" contract corresponding to any other outcome, including a liberal minority government. (CA97M.OT).
The third market operated by the UBC-ESM is the Popular Vote Market. There are also six contracts in this market corresponding to the popular vote shares of the parties (CA97P.LIB, CA97P.BQ, CA97P.REF, CA97P.NDP, CA97P.PC, CA97P.OT).
The UBC-ESM is modelled directly on the Iowa Political Stock Market which has been running successfully since 1988. The Directors of the UBC-ESM are indebted to their Iowa colleagues for their assistance in putting this market together. In 1993 the UBC-ESM operated markets on the Canadian Federal Election, attracting over 250 traders from across the country and investments of more than $30,000. In that election the popular vote market provided very accurate predictions of the final actual popular vote shares earned by the parties.
Why does the UBC-ESM exist?
The UBC-ESM is operated for educational and research purposes. For the directors it is a field experiment designed to study the predictive power of markets, the behaviour of traders, and the dynamics of the political campaign. Participating traders are provided the opportunity to learn about financial markets through direct participation, and the motivation to follow the 1997 federal election campaign more closely. They also realize the opportunity to make or lose money.
When did the market open and when will it close?
The market has been opened for trading at 12:00 noon PDT, Monday, April 28, 1997. It will remain open until 23:45 Pacific Daylight Time of June 1st, the day before election day June 2nd. Traders can open accounts or add cash to existing accounts at any time prior to the close of the market. Applications will be processed during regular business hours, Monday through Friday, 9am-4pm PDT.
How can I make money by participating?
As in other financial markets, you make money by "buying low and selling high." Contracts will earn post-election dividends, or liquidation values, which depend on the outcome of the election. While the market is operating you will earn profits by selling contracts at prices higher than you paid for them (and lose when you sell for less than the prices you paid). When the market closes you will make profits when the liquidation value of your contracts exceeds the prices you paid for them (and lose when the liquidation values are less than the prices you paid).
How are liquidation values determined?
Upon liquidation, each contract in a particular party in the Seats Market will earn $1.00 times the share of seats in the provincial legislature won by that party. For example, if the Liberal Party won 40% of the seats in the legislature, each CA97S.LIB share would pay 40¢. Shares of "Others" (CA97S.OT) will pay $1.00 times the share of seats won by candidates not affiliated with any of the other five named parties. In the Majority Government Market, a share pays $1 or $0 depending upon whether the Liberal Party won a majority or not. For example, if the Liberal Party won a majority each CA97M.LIB share would pay $1 while each CA97M.OT share would pay $0.
How much can I invest in the UBC-ESM and what is the minimum investment required?
The minimum investment in an UBC-ESM account is $5.00 and the maximum is $1,000. The amount you invest will be posted to your cash account. Funds from this account can then be used to buy individual contracts from other traders or from the UBC-ESM system. Similarly, sales of contracts are credited to the cash account and when the market closes, the liquidation values you earn on contracts will also be credited to this account. Funds remaining in your cash account after the election, including the credits from liquidations, will be refunded to you.
Are there any commission or enrolment fees?
No commissions or other fees are charged to traders. The only payments you will make to the UBC-ESM will be the amounts you choose to invest in the market, and the total of all invested funds will be redistributed to traders in the form of dividends or cash balance refunds. All receipts from market participants will be held on deposit by the University of British Columbia and any interest earned applied to help cover expenses associated with operating the market. The UBC-ESM is operated as a research experiment and all administrative costs are paid from research funds.
How do I make trades?
The UBC-ESM is a fully computerized market with no brokers or other middlemen. Registered traders log into their market accounts from their own computer terminals to check market prices or account information and to extend offers to buy or sell. Cost free access is available from virtually any personal computer or terminal attached to the Internet. All you need is a web browser such as Netscape (version 3.0) or the Microsoft Internet Explorer. The market remains open 20 hours a day during 3:45am PDT and 23:45 PDT.
Can I find the current market quotes without enroling?
Yes, information on market prices is available to the general public on our Market History page on the WWW. This page contains yesterday's high, low, and closing prices, as well as high, low, and average prices for the last 7 days. Market charts and stock charts are accessible through this market history page.
Where can I get additional information?
A complete trader's manual is posted on the WWW. Due to the cost involved in photocopying and distributing print-copies, the trader's manual will only be accessible through the WWW.
How can I contact you?
Faculty of Commerce and Business Administration
University of British Columbia
Vancouver, B.C. V6T 1Z2
Tel.: (604) 822-8614
Fax : (604) 822-8496