About the Market
The UBC Election Stock Market was a financial market in which the
ultimate values of the contracts being traded are based on the outcome
of the elections to the House of Commons in Ottawa and to provincial
parliaments and legislatures around Canada. Participants invested their
own funds, buy and sell listed contracts, and bear the risk of losing
money as well as earning profits.
The UBC-ESM was operated as a not-for-profit venture. The method of
issuing contracts and making final payoffs on these contracts ensures
that the UBC-ESM does not realize financial profits or suffer
losses. No commissions or transactions fees were charged.
The exclusive purposes for conducting this market were teaching and
research. Through the UBC-ESM, participants learned first-hand about the
operation of a financial market and, because they have an added
incentive to do so, they often become better informed about not only
the current election but also the election process itself. As a
research project, the UBC-ESM generated valuable data that will
provide insights into market and trader behaviour. Participation in
the UBC-ESM was open to all Canadian residents who are
at least 19 years of age.
The UBC-ESM Team
Prof. Thomas Ross, Ph.D., Director
Prof. Werner Antweiler, Ph.D., Director
Jessie Lam, Market Administrator
Sauder School of Business
Attention: Jessie Lam
2053 Main Mall
Vancouver, BC, V6T 1Z2
Questions and Answers
What are the objectives of the UBC Election Stock Market?
The market has four objectives.
First, investors are trying to predict the election outcome. Efficient markets
are very good at reflecting all available information and can often reflect
information faster than opinion
polls that take several days to complete and process. To this extent
the market has a public service function.
Second, the researchers learn about trader behaviour in a controlled setting,
which may be augmented by information obtained from traders through
questionnaires. Third, the market engages traders to follow the
political process more carefully. And fourth, the market teaches
participants about financial markets and trading strategies
such as "long" and "short" positions. Because of the educational
aspects of the UBC Election Stock Market, we particularly
encourage participation from students at high schools and
universities. The UBC Election Stock Market is open to all who have
an interest in Canadian politics.
Why do traders in the UBC Election Stock Market need to invest
real money; wouldn't "play money" accomplish the same objective?
We believe that real money is important -- there is a branch of
economics now that studies behaviour in a laboratory setting (like
psychologists have been doing for decades) and it is believed that if you
want to understand market activity in a lab you need to recreate the
incentives of the market which includes financial rewards.
Many markets have been run with "play money" and the results are generally
disappointing from the perspective of getting your participants to focus on
the task at hand and care about the outcome -- they way they would care in
real markets, for example.
Does the market further the involvement of participants in the
We think that the Election Stock Market is complementary to the
political process because the market makes participants pay more
attention to the election. As investors are challenged to put their
money where there mouths are, they need to take the election
process very seriously by paying attention and analyzing events carefully.
Does UBC make money from the UBC Election Stock Market?
No. UBC makes no money from this
market at all -- the total money invested is paid back out (to the penny).
There are no commissions or surcharges. But of course, some individual
investors will lose and some will gain.
How successful is the UBC Election Stock Market?
Based on the results from
markets for several federal and provincial elections in Canada,
the markets deliver predictions of popular vote shares
that are often more accurate than public opinion polls.
Our seats market is also one of the few sources of predictions
of the distribution of seats in the federal and provincial
How can I profit from trading in the UBC Election Stock Market?
Traders typically "buy low and sell high"
to make profits. Contracts in the UBC Election Stock Market reflect
expected election outcomes. Thus, if a trader finds that a contract
is currently undervalued, buying this "cheap"
contract may turn out to be profitable if the price of this contract
increases over time, or if the ultimate payout of the
contract as determined by the election outcome is higher than the
purchase price. Holding contracts in anticipation of an increase in
price is known as taking a "long position".
Traders can also profit when they see a contract that appears "overvalued".
In this case they take a "short position". Traders can profit from
buying a $1 unit portfolio of all contracts in a given market and selling
the overvalued contract. The details of the long and short strategies
are described in the trader's manual.
2020 Sauder School of Business,
University of British Columbia.