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Can asset markets be manipulated? A field experiment with racetrack betting

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  • Colin Camerer
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    Abstract

    To test whether naturally occurring markets can be strategically manipulated, $500 and $1,000 bets were made, then cancelled, at horse racing tracks. The net effects of these costless temporary bets give clues about how market participants react to information large bets might contain. The bets moved odds on horses visibly (compared to matched-pair control horses with similar prebet odds) and had a slight tendency to draw money toward the horse that was temporarily bet, but the net effect was close to zero and statistically insignificant. The results suggest that some bettors inferred information from bets and others did not, and their actions roughtly cancelled out.

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    File URL: http://karlan.yale.edu/fieldexperiments/papers/00222.pdf
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    Bibliographic Info

    Paper provided by The Field Experiments Website in its series Natural Field Experiments with number 00222.

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    Date of creation: 1998
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    Handle: RePEc:feb:natura:00222

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    Web page: http://www.fieldexperiments.com

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    Cited by:
    1. Luis A. Medrano & Xavier Vives, 1997. "Strategic behavior and price discovery," Economics Working Papers 238, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Wolfers, Justin & Zitzewitz, Eric, 2006. "Prediction Markets in Theory and Practice," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5578, C.E.P.R. Discussion Papers.
    3. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2012. "Prediction Markets for Economic Forecasting," IZA Discussion Papers 6720, Institute for the Study of Labor (IZA).
    4. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
    5. Helena Veiga & Marc Vorsatz, 2008. "Aggregation and Dissemination of Information in Experimental Asset Markets in the Presence of a Manipulator," Working Papers 2008-29, FEDEA.
    6. Paul Rhode & Koleman Strumpf, 2006. "Manipulating political stock markets: A field experiment and a century of observational data," Natural Field Experiments, The Field Experiments Website 00325, The Field Experiments Website.
    7. Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(2), pages 127-141, Spring.
    8. Patrick Bajari & Ali Horta�su, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.

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