I have been checking out the 2006 Senate Races on Tradesports, not much volume yet but things are picking up. I was also thinking about the roles of Hedgers and Speculators in political and legislative markets. It strikes me that one of the natural hedges in political races will be for political contributions. Contributions motivated by support of a canidate who holds similar political views and donations for "influence" both have a lot more value if the candidate wins.
It may also be true that contributions to an underdog or first-time candidate will have more impact as the politician is more grateful for the early support. I suspect there is also more satisfaction from a ideological supporter's point of view when a candidate wins in an upset. Of course, these underdog contributions are more likely to be "wasted" on a losing candidate. This extra benefit for a contribution to a winning-underdog could help the market's hedging function. If I have purchased enough of the favorite such that I get my donation back if my underdog loses -- I better be getting additional political value from my donation since it is going to expensive if my long-shot candidate wins.
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