The 2020 (Re)Election According to the Iowa Electronic Markets: Politics, Pandemic, Recession, and/or Protests?
by Thomas S. Gruca and Thomas A. Rietz
Multiple historic events characterize the 2020 Presidential election: the Mueller report, an impeachment vote, a pandemic, a recession, racial protests, etc. Did these events impact the expected election outcome? We study this question using Iowa Electronic Market (IEM) price changes around these events. We also examine the uncertainty around IEM vote-share forecasts for incumbent Donald Trump while comparing his chances to prior incumbents’.
Neither individual political events nor individual events leading to racial protests have significantly affected the 2020 election according to the IEM. While Trump’s chances fell during the stock market collapse and recession associated with the initial wave of COVID-19, they did not rise with the stock market recovery and decreasing new jobless claims. Instead, his chances continued to fall as COVID-19 cases rebounded and protests continued.
On 08/26/20, the IEM forecasted Republican vote-share ranged from 49.95% to 48.36% (depending how market prices are translated to forecasts). Considerable uncertainty remained in that all estimates of confidence intervals overlapped 50% vote-share. The IEM estimated chances of Trump winning the popular vote ranged from 33.99% to 33.10%.
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