The inane speculation about Donald Trump’s Vice-Presidential nominee is in full swing, with the media having just finished covering all of the silly possibilities for RFK Jr.’s pick. (It wasn’t Aaron Rodgers.)
This article aims to measure how much the VP pick matters to political traders using share prices from Presidential markets in the Iowa Electronic Markets for the three days before and after each major party’s Vice-Presidential announcement (or leak) went public. The two types of markets we’re looking at for each VP pick are:
- Winner-takes-all (WTA)
- Percent of two-party vote share (VS)
Please note that these two markets are wildly different:
WTA is “determined by which of the two nominees receives the larger share of the popular vote cast for the Democratic and Republican candidates.” For example, if the Republican presidential nominee receives 48.8%, the respective contract will be worth 0.0 cents per share (i.e., nothing).
VS is “determined by the percentages of the two-party popular vote received by the official Democratic and Republican nominees.” For example, if the Republican presidential nominee receives 48.8%, the respective contract will be worth 0.488 cents per share.
Here are the VS and WTA share prices three days before (+3) and three days after (-3) the Vice-Presidential pick was announced or leaked:
| Election | Party | Public | VS +3 days | VS -3 days | VS Net +/- | WTA +3 | WTA -3 | WTA Net +/- |
| 2000 | GOP | July 25 | 0.491 | 0.482 | -0.009 | 0.510 | 0.506 | -0.004 |
| 2000 | DEM | Aug 8 | 0.480 | 0.481 | +0.001 | 0.475 | 0.465 | -0.010 |
| 2004 | DEM | July 5 | 0.463 | 0.479 | +0.016 | 0.440 | 0.499 | +0.059 |
| 2008 | DEM | Aug 23 | 0.511 | 0.528 | +0.017 | 0.596 | 0.555 | -0.041 |
| 2008 | GOP | Aug 29 | 0.495 | 0.489 | -0.006 | 0.445 | 0.395 | -0.050 |
| 2012 | GOP | Aug 10 | 0.489 | 0.479 | -0.010 | 0.389 | 0.396 | +0.007 |
| 2016 | GOP | July 14 | 0.454 | 0.445 | -0.009 | 0.288 | 0.325 | +0.037 |
| 2016 | DEM | July 22 | 0.532 | 0.502 | -0.030 | 0.744 | 0.630 | -0.114 |
| 2020 | DEM | Aug 11 | 0.560 | 0.560 | 0.000 | 0.710 | 0.755 | +0.045 |
John Edwards, ironically, had the largest bump in winner-take-all markets and then went on to both lose the 2004 election and become one of the most reviled politicians in the country.
Tim Kaine’s nomination corresponded with the largest decline in winner-take-all markets. Still, we should note that the DNC email leak came out on the day of his announcement, which led to embarrassing revelations about the Clinton campaign and Democratic Party.
VS markets, in contrast, moved little relative to the WTA markets. Excluding Kaine for the reasons mentioned above, all VS price movement was under 2 cents/share. Only one VP pick had more movement in Vote share than Winner-takes-all: Dick Cheney’s announcement saw Bush’s WTA contracts decline by 0.004 cents, while VS contracts declined by 0.009 cents.
In general, there IEM traders had a minimal reaction to the VP picks. VS markets moved by about 1 cent/share on average, and WTA markets were mid- to low single digits except for Tim Kaine. And we probably shouldn’t put too much weight on these numbers as there were other political and news events happening simultaneously. For one example, most of these announcements were timed around the party’s national convention, and the McCain campaign scheduled Sarah Palin’s announcement immediately following the 2008 Democratic National Convention where Joe Biden was announced.
As always, there are several caveats:
- The above table uses “Last Price”, the last traded price before midnight.
- Liquidity in IEM markets declined over time, particularly as other trading platforms (legal and illegal) became available. Overall activity on IEM in 2020 was less than one-quarter of 2004.
You can see more about IEM share prices in Presidential elections at this dashboard or peruse IEM historical data.
And here is the recently updated working paper, “Iowa Electronic Markets: Forecasting the 2024 U.S. Election.”
For further analysis, it would be interesting to look at Intrade and PredictIt price movement around the VP pick, as well as compare different time ranges before and after the announcement. And besides price, how did the VP announcement affect trade volume?