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The Favourite‐Longshot Bias, Bookmaker Margins and Insider Trading in a Variety of Betting Markets

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  • Michael Cain
  • David Law
  • David Peel

Abstract

This paper verifies the existence of the favourite‐longshot bias in a variety of sports betting markets where odds are set by bookmakers, but the precise pattern of the bias is not identical. Evidence is found to support a central prediction of the Shin (1993) model, which asserts that bookmakers are impelled to create a bias in their odds because of the presence of insider traders: that margins increase with the number of competitors.

Suggested Citation

  • Michael Cain & David Law & David Peel, 2003. "The Favourite‐Longshot Bias, Bookmaker Margins and Insider Trading in a Variety of Betting Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 263-273, July.
    • Handle: RePEc:bla:buecrs:v:55:y:2003:i:3:p:263-273
    DOI: 10.1111/1467-8586.00174
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    References listed on IDEAS

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