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Herding in Imperfect Betting Markets with Inside Traders

Author

Listed:
  • Adi Schnytzer

    (Department of Economics, Bar-Ilan University)

  • Avichai Snir

    (Department of Economics, Bar-Ilan University)

Abstract

Herding is often considered as a phenomenon that drives prices of risky assets away from their equilibrium levels. In this paper we study the on-course UK and Australian horse betting markets. These are simple examples of imperfect markets for state-contingent assets. We provide strong evidence of herding behavior and show that the effects of herding are occasionally sufficient to render the markets inefficient even in the weak sense. Furthermore, the results demonstrate that traders with inside information are not always able to arbitrage away the effects of herding.

Suggested Citation

  • Adi Schnytzer & Avichai Snir, 2008. "Herding in Imperfect Betting Markets with Inside Traders," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 2(2), pages 1-15, September.
    • Handle: RePEc:buc:jgbeco:v:2:y:2008:i:2:p:1-15
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    Citations

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    Cited by:

    1. John Peirson & Michael A. Smith, 2010. "Expert Analysis and Insider Information in Horse Race Betting: Regulating Informed Market Behavior," Southern Economic Journal, John Wiley & Sons, vol. 76(4), pages 976-992, April.
    2. Schnytzer, Adi & Lamers, Martien & Makropoulou, Vasiliki, 2010. "The impact of insider trading on forecasting in a bookmakers' horse betting market," International Journal of Forecasting, Elsevier, vol. 26(3), pages 537-542, July.
    3. Sung, Ming-Chien & McDonald, David C.J. & Johnson, Johnnie E.V. & Tai, Chung-Ching & Cheah, Eng-Tuck, 2019. "Improving prediction market forecasts by detecting and correcting possible over-reaction to price movements," European Journal of Operational Research, Elsevier, vol. 272(1), pages 389-405.

    More about this item

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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