Herding in Imperfect Betting Markets with Inside Traders
AbstractHerding is often considered as a phenomenon that drives prices of risky assets away from their equilibrium levels. In this paper we study the on-course UK and Australian horse betting markets. These are simple examples of imperfect markets for state-contingent assets. We provide strong evidence of herding behavior and show that the effects of herding are occasionally sufficient to render the markets inefficient even in the weak sense. Furthermore, the results demonstrate that traders with inside information are not always able to arbitrage away the effects of herding.
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Bibliographic InfoPaper provided by Bar-Ilan University, Department of Economics in its series Working Papers with number 2011-08.
Date of creation: Mar 2011
Date of revision:
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Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
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- Les Coleman, 2007. "Just How Serious is Insider Trading? An Evaluation using Thoroughbred Wagering Markets," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 1(1), pages 31-55, February.
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