- By Sergio Non
- Aug 11, 2003
Classic efficient market theory says you can't beat the market in the long run, and statistics seem to support it. For example, a futures exchange operated by the University of Iowa since 1988 has been more accurate than polls 76 percent of the time for U.S. presidential and congressional elections. So why do futures markets work?
* Many minds are better than a few.
* Traders can quickly act on the most up-to-date information.
* Traders care more about being right because there's money involved.
The Iowa researchers have noted that futures prices — or, in other words, the market forecasts — are usually set by savvy traders who place their bets carefully, not by the occasional investor.