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Efficiency in Micro-Behaviors and FL Bias

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  • Kurihara Kazutaka
  • Yohei Tutiya

Abstract

In this paper, we propose a model which simulates odds distributions of pari-mutuel betting system under two hypotheses on the behavior of bettors: 1. The amount of bets increases very rapidly as the deadline for betting comes near. 2. Each bettor bets on a horse which gives the largest expectation value of the benefit. The results can be interpreted as such efficient behaviors do not serve to extinguish the FL bias but even produce stronger FL bias.

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  • Kurihara Kazutaka & Yohei Tutiya, 2018. "Efficiency in Micro-Behaviors and FL Bias," Papers 1805.04225, arXiv.org.
    • Handle: RePEc:arx:papers:1805.04225
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    References listed on IDEAS

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    1. Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-174, Spring.
    2. Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 315-326.
    3. Marshall Gramm & C. Nicholas McKinney, 2009. "The effect of late money on betting market efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 369-372.
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