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An Examination of Market Efficiency in British Racetrack Betting

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Author Info
Gabriel, Paul E
Marsden, James R
Abstract

The nature of the British racetrack betting market provides a distinctly different opportunity for testing market efficiency. On the basis of data from a single racing season, we compare the returns to two similar forms of bettings: (1) starting price bets placed with bookmakers and (2) pari-mutuel tote bets. Our analysis indicates that tote returns are consistently higher than starting price returns, even though both betting forms are of similar risk and the payoffs are widely reported. The persistently higher tote returns suggest that the British racetrack betting market does not satisfy the conditions of semistrong efficiency. Our results also provide indirect support that the market fails to meet the conditions for strong efficiency. Copyright 1990 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 98 (1990)
Issue (Month): 4 (August)
Pages: 874-85
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Handle: RePEc:ucp:jpolec:v:98:y:1990:i:4:p:874-85

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  1. Nicholas Economides, 2003. "A Parimutuel Market Microstructure for Contingent Claims," Working Papers 03-18, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  2. Jeffrey Lange & Nicholas Economides, 2001. "A Parimutuel Market Microstructure for Contingent Claims Trading," Working Papers 01-13, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  3. David Paton & Leighton Vaughan Williams, 2001. "Monopoly Rents and Price Fixing in Betting Markets," Review of Industrial Organization, Springer, vol. 19(3), pages 265-278, November. [Downloadable!] (restricted)
  4. Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor and Francis Journals, vol. 36(4), pages 315-326, March. [Downloadable!] (restricted)
  5. Jakobsson, Robin & Karlsson, Niklas, 2007. "Testing Market Efficiency in a Fixed Odds Betting Market," Working Papers 2007:12, Örebro University, Swedish Business School. [Downloadable!]
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