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Recreational versus professional bettors: Performance differences and efficiency implications

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  • Bruce, A.C.
  • Johnson, J.E.V.
  • Peirson, J.

Abstract

Using a novel dataset, which allows comparisons across heterogeneous sub-groups of pari-mutuel bettors, we demonstrate significant behaviour and performance distinctions between recreational and professional investors. Professionals’ ability to earn abnormal returns on short odds horses in high volume markets challenges the existing empirical consensus, which offers very limited evidence of betting market inefficiency. The results offer important lessons for betting operators and regulators and highlight the potential for similar avenues of investigation in other speculative markets.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 114 (2012)
Issue (Month): 2 ()
Pages: 172-174

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Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:172-174

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Betting; Horse racing; Efficient markets;

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References

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  1. Crafts, Nicholas F R, 1985. "Some Evidence of Insider Knowledge in Horse Race Betting in Britain," Economica, London School of Economics and Political Science, vol. 52(27), pages 295-304, August.
  2. Shin, Hyun Song, 1993. "Measuring the Incidence of Insider Trading in a Market for State-Contingent Claims," Economic Journal, Royal Economic Society, vol. 103(420), pages 1141-53, September.
  3. Asch, Peter & Malkiel, Burton G. & Quandt, Richard E., 1982. "Racetrack betting and informed behavior," Journal of Financial Economics, Elsevier, vol. 10(2), pages 187-194, July.
  4. Pope, Peter F & Peel, David A, 1989. "Information, Prices and Efficiency in a Fixed-Odds Betting Market," Economica, London School of Economics and Political Science, vol. 56(223), pages 323-41, August.
  5. Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 315-326.
  6. Alistair C. Bruce & Johnnie E. V. Johnson & John D. Peirson & Jiejun Yu, 2009. "An Examination of the Determinants of Biased Behaviour in a Market for State Contingent Claims," Economica, London School of Economics and Political Science, vol. 76(302), pages 282-303, 04.
  7. Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
  8. David Peel & David Law, 2009. "A More General Non-expected Utility Model as an Explanation of Gambling Outcomes for Individuals and Markets," Economica, London School of Economics and Political Science, vol. 76(302), pages 251-263, 04.
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