Iowa’s Effect on the Political Markets

As I’ve mentioned before, the Iowa Electronic Market is a great place to see how events shape the perceived probabilities of each candidate winning the nomination. Here is today’s graph, showing the last night’s Iowa caucus results have affected the shares of all of the candidates. Note that Edwards is contained in the grey ROF line just below Kerry’s line in recent days.

The market apparently now thinks that Kerry and Dean have almost equal chances of winning the nomination now (about 30-35% each) while Clark and Edwards both have around a 20% chance of winning. I agree with AB: This is going to be good – pass the popcorn!