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Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds

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  • Palomino, F.A.
  • Renneboog, L.D.R.
  • Zhang, C.

    (Tilburg University, Center for Economic Research)

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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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-62.

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

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Web page: http://center.uvt.nl

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  1. Renneboog, L.D.R. & Vanbrabant, P., 2000. "Share Price Reactions to Sporty Performances of Soccer Clubs listed on the London Stock Exchange and the AIM," Discussion Paper 2000-19, Tilburg University, Center for Economic Research.
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Cited by:
  1. Georg Stadtmann, 2006. "Frequent News and Pure Signals: The Case of a Publicly Traded Football Club," Working Papers 0603, International Association of Sports Economists & North American Association of Sports Economists.
  2. 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 & North American Association of Sports Economists.

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