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COMPUTER INDUSTRY RETURNS MARKET

COMPUTER INDUSTRY RETURNS MARKET. Iowa Electronic Markets. Contracts. Winner-Takes-All Contracts Based on the returns of securities in the computer industry AAPL, IBM, MSFT & S&P500 Liquidation values determined by (dividend adjusted) rates of return

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COMPUTER INDUSTRY RETURNS MARKET

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  1. COMPUTER INDUSTRY RETURNS MARKET Iowa Electronic Markets

  2. Contracts • Winner-Takes-All Contracts • Based on the returns of securities in the computer industry • AAPL, IBM, MSFT & S&P500 • Liquidation values determined by (dividend adjusted) rates of return • From the third Friday of one month to the third Friday of the next month • Highest return pays $1

  3. Contract Designations • Ticker symbol and letter • Ticker denotes underlying stock or index • Letter denotes month Underlying Liquidation Contract Fundamental Value AAPLm Apple Comp. $1.00 if AAPL return is highest IBMm IBM $1.00 if IBM return is highest MSFTm Microsoft $1.00 if MSFT return is highest SP500m S&P 500 Index $1.00 if SP500 return is highest

  4. Month Codes Month Code Month Code Month Code January a May e September i February b June f October j March c July g November k April d August h December l

  5. Unit Portfolios • 1 Share of each contract • May be purchased from or sold to the exchange at any time for $1 using 1$m • May be purchased from or sold to other traders at any time using MKTm

  6. Contract Liquidation • Monday after 3rd Friday of month • Official prices • The Midwest Edition of the Wall Street Journal • Effects of events • Delisting: • Use last trade price • Stock Split/Stock Dividend • Multiply last price to reflect pre-split/dividend value • Dividend • Included in return

  7. Computing Returns • AAPLm, IBMm and MSFTm • S&P500m

  8. Other Information • Listing new contracts • Monday after 3rd Friday of each month • Access • Academic traders

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