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Information and Efficiency: Goal Arrival in Soccer Betting

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  • Karen Croxson
  • J. James Reade

Abstract

In an efficient market news is incorporated into prices rapidly and completely. Attempts to test for this in financial markets have been undermined by the possibility of information leakage unobserved by the econometrician. An alternative is to switch to laboratory conditions, at the price of some artificiality. Potentially, sports betting markets offer a superior way forward: assets have terminal values and news can break remarkably cleanly, as when a goal is scored in soccer. We exploit this context to test for efficiency, applying a novel identification strategy to high-frequency data. On our evidence, prices update swiftly and fully.

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Bibliographic Info

Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 11-01.

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Length: 40 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bir:birmec:11-01

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Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk
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Keywords: Information; market efficiency; gambling;

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References

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  1. Carlos Santos & David Hendry & Soren Johansen, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, vol. 23(2), pages 317-335, April.
  2. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  3. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989. "Positive Feedback Investment Strategies and Destabilizing Rational Speculation," NBER Working Papers 2880, National Bureau of Economic Research, Inc.
  4. Wolfers, Justin & Zitzewitz, Eric, 2006. "Interpreting Prediction Market Prices as Probabilities," IZA Discussion Papers 2092, Institute for the Study of Labor (IZA).
  5. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," NBER Working Papers 10504, National Bureau of Economic Research, Inc.
  6. John List, 2004. "Testing neoclassical competitive theory in multi-lateral decentralized markets," Framed Field Experiments 00176, The Field Experiments Website.
  7. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  8. Plott, Charles R & Sunder, Shyam, 1988. "Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets," Econometrica, Econometric Society, vol. 56(5), pages 1085-1118, September.
  9. repec:reg:rpubli:259 is not listed on IDEAS
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Cited by:
  1. Egon Franck & Erwin Verbeek & Stephan Nüesch, 2008. "Prediction Accuracy of Different Market Structures – Bookmakers versus a Betting Exchange," Working Papers 0025, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2009.
  2. Michael Ehrmann & David-Jan Jansen, 2014. "It Hurts (Stock Prices) When Your Team Is About to Lose a Soccer Match," Working Papers 14-2, Bank of Canada.
  3. Jennifer Castle & David Hendry, 2013. "Forecasting and Nowcasting Macroeconomic Variables: A Methodological Overview," Economics Series Working Papers 674, University of Oxford, Department of Economics.
  4. Marco Ottaviani & Peter Norman Sørensen, 2009. "Aggregation of Information and Beliefs: Asset Pricing Lessons from Prediction Markets," Discussion Papers 09-14, University of Copenhagen. Department of Economics.
  5. Raphael Flepp & Stephan Nüesch & Egon Franck, 2013. " Liquidity, Market Efficiency and the Influence of Noise Traders: Quasi-Experimental Evidence from the Betting Industry," Working Papers 341, University of Zurich, Department of Business Administration (IBW).
  6. Karen Croxson & J. James Reade, 2011. "Exchange vs Dealers: A High-Frequency Analysis of In-Play Betting Prices," Discussion Papers 11-19, Department of Economics, University of Birmingham.
  7. Â Leif Brandes & Â Egon Franck & Â Erwin Verbeek, . "Â The Validity of Models on the Information Content of Trades," Working Papers 00120, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2010.
  8. Alasdair Brown, 2013. "Information Acquisition in Ostensibly Efficient Markets," University of East Anglia Applied and Financial Economics Working Paper Series 043, School of Economics, University of East Anglia, Norwich, UK..
  9. Egon Franck & Erwin Verbeek & Stephan Nuesch, 2009. "Inter-market Arbitrage in Sports Betting," NCER Working Paper Series 48, National Centre for Econometric Research.

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