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An application of expert information to win betting on the Kentucky Derby, 1981-2005

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  • Roderick Bain
  • Donald Hausch
  • William Ziemba
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    Abstract

    The Kentucky Derby features top three-year-old thoroughbred horses. Run at [image omitted]� miles, it is typically at least 1/8 mile longer than any of the horses has raced before. This extra distance, usually combined with a large field, makes the race a difficult test of stamina for horses this young. Bettors, because there is no direct evidence of whether a horse has the stamina to compete effectively at [image omitted]� miles, are also challenged. The informational content of one publicly available, pedigree-based measure of stamina, the Dosage Index, is used with simple performance measures to identify a semi-strong-form inefficiency, and to create a betting scheme based on the optimal capital growth model that merges these criteria with the public's opinion. Statistically significant profits, net of transaction costs, could have been achieved during the period 1981 to 2005.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470500531051
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

    Volume (Year): 12 (2006)
    Issue (Month): 4 ()
    Pages: 283-301

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    Handle: RePEc:taf:eurjfi:v:12:y:2006:i:4:p:283-301

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    Related research

    Keywords: Semi-strong market efficiency; capital growth theory; speculative investments; sports betting;

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    1. L. C. MacLean & W. T. Ziemba & G. Blazenko, 1992. "Growth Versus Security in Dynamic Investment Analysis," Management Science, INFORMS, vol. 38(11), pages 1562-1585, November.
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