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Stock price reactions to short-lived public information: the case of betting odds

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Author Info
Palomino, Frederic
Renneboog, L.D.R.
Zhang, Chendi (Tilburg University, Center for Economic Research)

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Abstract

Stock markets and betting markets co-exist for professional soccer clubs listed on the London Stock Exchange. For each firm, two pieces of information are released to the stock market on a weekly basis from August to June: experts expectations about game outcomes through the betting odds, and the game outcomes. Stock markets process the news about games results fast. By contrast, there is no evidence of abnormal returns on the trading days following release of betting information. Moreover, due to the absence of a market reaction to betting odds and the fact that these odds are very good predictors of game outcomes, these odds contain unpriced information and can be used to predict short-run stock returns. Our findings are consistent with theories of under-reaction to public information and the impact of the level of salience of information on the speed at which financial markets process information.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 62.

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Date of creation: 2005
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Handle: RePEc:dgr:kubcen:200562

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 12(4), pages 653-86.
  2. Brown, Gregory W. & Hartzell, Jay C., 2001. "Market reaction to public information: The atypical case of the Boston Celtics," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 333-370, May. [Downloadable!] (restricted)
  3. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September. [Downloadable!] (restricted)
  4. Harrison Hong & Jeffrey D. Kubik & Amit Solomon, 2000. "Security Analysts' Career Concerns and Herding of Earnings Forecasts," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 121-144, Spring.
  5. Renneboog, L.D.R. & Vanbrabant, P., 2000. "Share price reactions to sporty performance of soccer clubs listed on the London stock exchange and the AIM," Discussion Paper 19, Tilburg University, Center for Economic Research. [Downloadable!]
  6. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(1), pages 97-124. [Downloadable!] (restricted)
  7. Ioannis Asimakopoulos & John Goddard, 2004. "Forecasting football results and the efficiency of fixed-odds betting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(1), pages 51-66. [Downloadable!]
  8. Harrison Hong & Jeremy C. Stein, 1997. "A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets," NBER Working Papers 6324, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December. [Downloadable!] (restricted)
  10. Peter Klibanoff & Owen Lamont & Thierry A. Wizman, 1998. "Investor Reaction to Salient News in Closed-End Country Funds," Journal of Finance, American Finance Association, vol. 53(2), pages 673-699, 04. [Downloadable!] (restricted)
  11. Frederic Palomino & Jozsef Sakovics, 2004. "Inter-league competition for talent vs. competitive balance," ESE Discussion Papers 96, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  12. Sonia Falconieri & Frederic Palomino & Jozsef Sakovics, 2004. "Collective vs. Individual Sale of TV Rights in League Sports," ESE Discussion Papers 85, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  13. Nicholas Barberis & Andrei Shleifer & Robert W. Vishny, 1997. "A Model of Investor Sentiment," NBER Working Papers 5926, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December. [Downloadable!] (restricted)
  15. John C. Easterwood & Stacey R. Nutt, 1999. "Inefficiency in Analysts' Earnings Forecasts: Systematic Misreaction or Systematic Optimism?," Journal of Finance, American Finance Association, vol. 54(5), pages 1777-1797, October. [Downloadable!] (restricted)
  16. Pope, Peter F & Peel, David A, 1989. "Information, Prices and Efficiency in a Fixed-Odds Betting Market," Economica, London School of Economics and Political Science, vol. 56(223), pages 323-41, August. [Downloadable!] (restricted)
  17. Kuypers, Tim, 2000. "Information and Efficiency: An Empirical Study of a Fixed Odds Betting Market," Applied Economics, Taylor and Francis Journals, vol. 32(11), pages 1353-63, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Georg Stadtmann, 2006. "Frequent News and Pure Signals: The Case of a Publicly Traded Football Club," IASE Conference Papers 0625, International Association of Sports Economists. [Downloadable!]
  2. Georg Stadtmann, 2006. "Frequent News and Pure Signals: The Case of a Publicly Traded Football Club," Working Papers 0603, International Association of Sports Economists. [Downloadable!]
  3. Dennis Coates & Brad R. Humphreys, 2008. "The Effect of On-Field Success on Stock Prices: Evidence from Nippon Professional Baseball," Working Papers 0805, International Association of Sports Economists. [Downloadable!]
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This page was last updated on 2009-11-25.

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