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Is timing everything in horse betting? Bet amount, timing and bettors’ returns in pari-mutuel wagering markets

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  • Suhonen, Niko
  • Saastamoinen, Jani
  • Kainulainen, Tuomo
  • Forrest, David

Abstract

Noise trader models suggest that ‘smart money’ profits from uninformed speculators. This paper investigates how rates of return are associated with the timing of a bet and the amount staked in a pari-mutuel horse betting market. We employ a novel data set measured at the level of individual bettors on the Finnish monopoly operator’s online platform. Our findings suggest that, relative to other bets, late high-stakes wagers are more profitable. This implies that, along with timing, bet sizes should be accounted for when analysing market efficiency.

Suggested Citation

  • Suhonen, Niko & Saastamoinen, Jani & Kainulainen, Tuomo & Forrest, David, 2018. "Is timing everything in horse betting? Bet amount, timing and bettors’ returns in pari-mutuel wagering markets," Economics Letters, Elsevier, vol. 173(C), pages 97-99.
    • Handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:97-99
    DOI: 10.1016/j.econlet.2018.09.021
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    References listed on IDEAS

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    1. Bradley, Ian, 2003. "The representative bettor, bet size, and prospect theory," Economics Letters, Elsevier, vol. 78(3), pages 409-413, March.
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    5. Ming-Chien Sung & Johnnie E. V. Johnson & John Peirson, 2012. "Discovering a Profitable Trading Strategy in an Apparently Efficient Market: Exploiting the Actions of Less Informed Traders in Speculative Markets," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 39(7-8), pages 1131-1159, September.
    6. Marshall Gramm & C. Nicholas McKinney, 2009. "The effect of late money on betting market efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 369-372.
    7. John Gandar & Richard Zuber & R. Stafford Johnson, 2001. "Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1621-1629.
    8. Feess, Eberhard & Müller, Helge & Schumacher, Christoph, 2016. "Estimating risk preferences of bettors with different bet sizes," European Journal of Operational Research, Elsevier, vol. 249(3), pages 1102-1112.
    9. Amit Gandhi & Ricardo Serrano-Padial, 2015. "Does Belief Heterogeneity Explain Asset Prices: The Case of the Longshot Bias," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 156-186.
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    Cited by:

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    2. Dave Cliff, 2021. "BBE: Simulating the Microstructural Dynamics of an In-Play Betting Exchange via Agent-Based Modelling," Papers 2105.08310, arXiv.org.

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    More about this item

    Keywords

    Bet size; Individual-level data; Market efficiency; Pari-mutuel betting; Timing;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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