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Testing Market Efficiency in a Fixed Odds Betting Market

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  • Jakobsson, Robin

    ()
    (Department of Business, Economics, Statistics and Informatics)

  • Karlsson, Niklas

    ()
    (Department of Business, Economics, Statistics and Informatics)

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    Abstract

    This paper tests the hypothesis of market efficiency for the fixed odds betting market of Swedish trotting head-to-head matches. The hypothesis is carried out by a Wald test within a logistic regression model. Data support rejection of semi-strong efficiency at the 5 percent level of significance, while the weak form efficiency cannot be rejected. Moreover, evaluation of the simple strategy to bet on those horses where, conditional on the estimated model, the expected profit is positive results in a profit of 7.8 percent per bet.

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    File URL: http://www.oru.se/PageFiles/15374/wp2007-12.pdf
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    Bibliographic Info

    Paper provided by Örebro University, School of Business in its series Working Papers with number 2007:12.

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    Length: 13 pages
    Date of creation: 13 Dec 2007
    Date of revision:
    Handle: RePEc:hhs:oruesi:2007_012

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    Postal: Örebro University School of Business, SE - 701 82 ÖREBRO, Sweden
    Phone: 019-30 30 00
    Fax: 019-33 25 46
    Web page: http://www.oru.se/Institutioner/Handelshogskolan-vid-Orebro-universitet/
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    Related research

    Keywords: EMH; betting; trotting; market; efficiency; logit; Wald;

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    1. Tim Kuypers, 2000. "Information and efficiency: an empirical study of a fixed odds betting market," Applied Economics, Taylor & Francis Journals, vol. 32(11), pages 1353-1363.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    3. 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.
    4. Figlewski, Stephen, 1979. "Subjective Information and Market Efficiency in a Betting Market," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 75-88, February.
    5. Ali, Mukhtar M, 1977. "Probability and Utility Estimates for Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 803-15, August.
    6. 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.
    7. Gabriel, Paul E & Marsden, James R, 1990. "An Examination of Market Efficiency in British Racetrack Betting," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 874-85, August.
    8. Asch, Peter & Malkiel, Burton G & Quandt, Richard E, 1986. "Market Efficiency in Racetrack Betting: Further Evidence and a Correction," The Journal of Business, University of Chicago Press, vol. 59(1), pages 157-60, January.
    9. Snyder, Wayne W, 1978. "Horse Racing: Testing the Efficient Markets Model," Journal of Finance, American Finance Association, vol. 33(4), pages 1109-18, September.
    10. Gandar, John, et al, 1988. " Testing Rationality in the Point Spread Betting Market," Journal of Finance, American Finance Association, vol. 43(4), pages 995-1008, September.
    11. Asch, Peter & Malkiel, Burton G & Quandt, Richard E, 1984. "Market Efficiency in Racetrack Betting," The Journal of Business, University of Chicago Press, vol. 57(2), pages 165-75, April.
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