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Do bookmakers possess superior skills to bettors in predicting outcomes?

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Author Info

  • Smith, Michael A.
  • Paton, David
  • Williams, Leighton Vaughan

Abstract

In this paper we test the hypothesis that bookmakers display superior skills to bettors in predicting the outcome of sporting events by using matched data from traditional bookmaking and person-to-person exchanges. Employing a conditional logistic regression model on horse racing data from the UK we find that, in high liquidity betting markets, betting exchange odds have more predictive value than the corresponding bookmaker odds. To control for potential spillovers between the two markets, we repeat the analysis for cases where prices diverge significantly. Once again, exchange odds yield more valuable information concerning race outcomes than the bookmaker equivalents.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 71 (2009)
Issue (Month): 2 (August)
Pages: 539-549

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Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:539-549

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

Related research

Keywords: Betting exchanges Market efficiency Prediction;

References

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  1. Michael A. Smith & David Paton & Leighton Vaughan Williams, 2006. "Market Efficiency in Person-to-Person Betting," Economica, London School of Economics and Political Science, vol. 73(292), pages 673-689, November.
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Citations

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Cited by:
  1. Kauffeldt, Florian & Wiesenfarth, Boris, 2014. "Confidence, Pessimism and their Impact on Product Differentiation in a Hotelling Model with Demand Location Uncertainty," Working Papers 0562, University of Heidelberg, Department of Economics.
  2. Egon Franck & Erwin Verbeek & Stephan Nuesch, 2009. "Inter-market Arbitrage in Sports Betting," NCER Working Paper Series 48, National Centre for Econometric Research.
  3. Król, Michał, 2012. "Product differentiation decisions under ambiguous consumer demand and pessimistic expectations," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 593-604.
  4. Raphael Flepp & Stephan Nüesch & Egon Franck, 2013. " The Liquidity Advantage of Quote-driven Markets: Evidence from the Betting Industry," Working Papers 342, University of Zurich, Department of Business Administration (IBW).

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