Introduction to the IEM

Introduction to the IEM The University of Iowa College of Business Administration History  Inception in 1988 – Run for elections around the world – Markets designed specifically for classroom use since 1993  Used in many classes and fields – accounting – economics – finance – political science Introduction  Electronic futures market  Three primary sub-markets: – Iowa Political Market – Iowa Earnings and Returns Market – Iowa Economic Indicator Market  Students have real incentives to learn about markets and follow economic, financial and political news Why use the IEM in Classes?  Broader learning experience  Improves pedagogy  Applies class concepts  Involves students in integrated learning along the information super-highway How the IEM Works  “Contracts” are traded on the IEM  Contracts have “liquidation values” determined by some future event  Contracts are listed in bundles called “unit portfolios”  Contracts are created when traders purchase unit portfolios from the exchange An Example: The Computer Industry Returns Market  Contracts for July – AAPLg, IBMg, MSFTg, & SP500g  Liquidation values determined by returns – Highest return over horizon pays $1  Bundle – 1 of each contract An Example: The MSFT (Microsoft) Price Level Market  Contracts for July – MSxxxgH & MSxxxgL  Liquidation values determined by prices – MSxxxgH pays of MSFT NASDAQ price closes above $xxx – MSxxxgL pays of MSFT NASDAQ price closes below or equal to $xxx  Bundle: – One of each contract Frequently Asked Questions  Who Can Participate in the IEM? – Anyone can trade in political markets – Academically affiliated individuals can trade in all markets  I Live in Europe, Can I Still Trade in the US Political Markets? – Yes  Are the Participants Playing with Real Money? – Yes  Why Would Anyone Operate a Not-for-profit Real-money Market? – For research and educational purposes  Is it Legal? – Yes Frequently Asked Questions  How Do I Sign Up? How Do I Sign up My Class? – Through the web: http://www.mhhe.com/irwin/iem  How Do I Access the IEM? – Through the web: http://www.biz.uiowa.edu/iem – Trading through telnet: iemi.biz.uiowa.edu  What If I Am Having Trouble Logging In? – Wrong ID or password? – Have we received payment and signature form? – System trouble?  What If I Changed My Password, and I Can't Remember What it Was? – E-mail: iem@uiowa.edu Frequently Asked Questions  How Do Participants Make Money? – Capital gains and losses – Liquidation values  How Do I Trade? – Through telnet: iemi.biz.uiowa.edu – Menu driven system  I Made Mistake When Trading, Can I Undo this Mistake? – You can withdraw outstanding bids and asks – You cannot “undo” executed orders Frequently Asked Questions  How Does the IEM Safeguard My Money? – Your money will remain on account at the University of Iowa  How Do I Get My Trading Account Funds Back? – Fill out webform at http://www.biz.uiowa.edu/iem/ – Or e-mail: iem@uiowa.edu  I Want to Close My Account; Do I Have to Liquidate the Contracts I'm Holding? – Yes