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Introduction to Prices vs. Handicapping: Place and Show Anomalies

In: Efficiency Of Racetrack Betting Markets

Author

Listed:
  • Donald B. Hausch

    (University of Wisconsin-Madison, USA)

  • Victor S. Y. Lo

    (University of British Columbia, Canada)

  • William T. Ziemba

    (University of British Columbia, Canada)

Abstract

Most of the research on racetrack efficiency has focused on the win bet market, and the general conclusion has been that there exists a favorite-longshot bias but it is not sufficiently strong to allow positive profits (e.g. Snyder (1978)1). Extreme favorites of odds 3-10 and shorter are an exception, allowing a small positive return, but they are so uncommon that for practical purposes the win market is weak form efficient, see Ziemba and Hausch (1986)2. Inefficiencies in the place and show markets, however, have been reported as early as Griffith (1961)1. There are several explanations: 1) their pools are smaller; 2) place and show wagers are more complicated than win bets since many different payoffs are possible depending on which horses are the first two or three finishers; and 3) extrapolating the win market's bias for favorites to higher probability place and show bets on favorites suggests a potential for inefficiencies…

Suggested Citation

  • Donald B. Hausch & Victor S. Y. Lo & William T. Ziemba, 2008. "Introduction to Prices vs. Handicapping: Place and Show Anomalies," World Scientific Book Chapters, in: Donald B Hausch & Victor SY Lo & William T Ziemba (ed.), Efficiency Of Racetrack Betting Markets, chapter 35, pages 355-356, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812819192_0035
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