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Evidence of in-play insider trading on a UK betting exchange

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  • Alasdair Brown

Abstract

An open question in market microstructure is whether ‘informed’ traders have an advantage due to access to private, inside, information; or due to a superior ability to process public information. In this article we attempt to answer this question with data from a sports betting exchange taken during play. Uniquely, this allows us to time-stamp information events to the nearest second, and to ensure we are observing all relevant information regarding the value of an asset. We find evidence of inside information but not of a superior ability to process public information. The first finding suggests that a subset of the betting population are observing the action before the wider public (possibly due to delays in the television signal), and betting using this informational advantage.

Suggested Citation

  • Alasdair Brown, 2012. "Evidence of in-play insider trading on a UK betting exchange," Applied Economics, Taylor & Francis Journals, vol. 44(9), pages 1169-1175, March.
    • Handle: RePEc:taf:applec:44:y:2012:i:9:p:1169-1175
    DOI: 10.1080/00036846.2010.537644
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    Cited by:

    1. Norton, Hugh & Gray, Steve & Faff, Robert, 2015. "Yes, one-day international cricket ‘in-play’ trading strategies can be profitable!," Journal of Banking & Finance, Elsevier, vol. 61(S2), pages 164-176.
    2. Bizzozero, Paolo & Flepp, Raphael & Franck, Egon, 2018. "The effect of fast trading on price discovery and efficiency: Evidence from a betting exchange," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 126-143.
    3. Paolo Bizzozero & Raphael Flepp & Egon Franck, 2017. " Insider trading and price efficiency: Evidence from a betting exchange," Working Papers 368, University of Zurich, Department of Business Administration (IBW).
    4. Alasdair Brown & Fuyu Yang, 2015. "Adverse Selection, Speed Bumps and Asset Market Quality," University of East Anglia Applied and Financial Economics Working Paper Series 070, School of Economics, University of East Anglia, Norwich, UK..

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