Introduction to the IEM The University of Iowa College of Business Administration

History 4 Inception in 1988 –Run for elections around the world –Markets designed specifically for classroom use since Used in many classes and fields –accounting –economics –finance –political science

Introduction 4 Electronic futures market 4 Three primary sub-markets: –Iowa Political Market –Iowa Earnings and Returns Market –Iowa Economic Indicator Market 4 Students have real incentives to learn about markets and follow economic, financial and political news

Why use the IEM in Classes? 4 Broader learning experience 4 Improves pedagogy 4 Applies class concepts 4 Involves students in integrated learning along the information super-highway

How the IEM Works 4 “Contracts” are traded on the IEM 4 Contracts have “liquidation values” determined by some future event 4 Contracts are listed in bundles called “unit portfolios” 4 Contracts are created when traders purchase unit portfolios from the exchange

An Example: The Computer Industry Returns Market 4 Contracts for July –AAPLg, IBMg, MSFTg, & SP500g 4 Liquidation values determined by returns –Highest return over horizon pays $1 4 Bundle –1 of each contract

An Example: The MSFT (Microsoft) Price Level Market 4 Contracts for July –MSxxxgH & MSxxxgL 4 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 4 Bundle: –One of each contract

Frequently Asked Questions 4 Who Can Participate in the IEM? –Anyone can trade in political markets –Academically affiliated individuals can trade in all markets 4 I Live in Europe, Can I Still Trade in the US Political Markets? –Yes 4 Are the Participants Playing with Real Money? –Yes 4 Why Would Anyone Operate a Not ‑ for ‑ profit Real ‑ money Market? –For research and educational purposes 4 Is it Legal? –Yes

Frequently Asked Questions 4 How Do I Sign Up? How Do I Sign up My Class? –Through the web: 4 How Do I Access the IEM? –Through the web: –Trading through telnet: iemi.biz.uiowa.edu 4 What If I Am Having Trouble Logging In? –Wrong ID or password? –Have we received payment and signature form? –System trouble? 4 What If I Changed My Password, and I Can't Remember What it Was? –

Frequently Asked Questions 4 How Do Participants Make Money? –Capital gains and losses –Liquidation values 4 How Do I Trade? –Through telnet: iemi.biz.uiowa.edu –Menu driven system 4 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 4 How Does the IEM Safeguard My Money? –Your money will remain on account at the University of Iowa 4 How Do I Get My Trading Account Funds Back? –Fill out webform at –Or 4 I Want to Close My Account; Do I Have to Liquidate the Contracts I'm Holding? –Yes