Putting money where the mouth is: political markets

I remember when faculty at the University of Iowa started an electronic stock market for politics. The web was in its infancy at that time, and both the web and political markets have taken off since then.

Are political markets clear prognosticators of election results? Quite a tough question. According to the Iowa folks, "The market is closer to the eventual outcome 74% of the time. Further, the market significantly outperforms the polls in every election when forecasting more than 100 days in advance."

The Iowa market's price chart shows a tightening race. Contract price charts for McCain and Obama from Intrade show that McCain stock is rising and Obama's is falling. The values for Obama and McCain are nearly identical and reversed between these two markets.
Obama's chart from Intrade is on top, and McCain's is below that.



Notice how their respective prices have changed over the year, and in recent weeks.
Update: I wondered whether there were any changes in the bin Laden stock--on whether he will be captured soon. Look at the line beginning to trend up again, after sloping down for a while :-)