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Price movements and the prevalence of informed traders: The case of line movement in college basketball

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  • Krieger, Kevin
  • Fodor, Andy
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    Abstract

    Recent research has hypothesized that a higher concentration of informed traders in a market implies that prices are more efficient. A reasonable next question is whether large price movements in markets with a relatively more informed clientele are more indicative of information realization. We find line movements in college basketball games of relatively low profile, denoted by the lack of a “power conference” team in the contest, are significantly more likely to be the result of information realization. This confirms that substantial price changes in markets with fewer ordinary traders are more (less) likely indicative of information flow (noise).

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    File URL: http://www.sciencedirect.com/science/article/pii/S0148619513000295
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 68 (2013)
    Issue (Month): C ()
    Pages: 70-82

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    Handle: RePEc:eee:jebusi:v:68:y:2013:i:c:p:70-82

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

    Related research

    Keywords: Sports gambling; Line movement; Price changes;

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