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What Causes the Favorite-Longshot Bias? Further Evidence from Tennis

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  • Lahvicka, Jiri

Abstract

In sports betting markets, bets on favorites tend to have a higher expected value than bets on longshots. This article uses a data set of almost 45,000 professional single tennis matches to show that the favorite-longshot bias is much stronger in matches between lower-ranked players, in later-round matches, and in high-profile tournaments. These results cannot be solely explained by bettors being locally risk-loving or overestimating chances of longshots, but are consistent with bookmakers protecting themselves against both better informed insiders and the general public exploiting new information.

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File URL: http://mpra.ub.uni-muenchen.de/47905/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47905.

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Date of creation: 30 Jun 2013
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Handle: RePEc:pra:mprapa:47905

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Keywords: favorite-longshot bias; tennis; sports betting; market efficiency;

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  1. Snowberg, Erik & Wolfers, Justin, 2010. "Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?," CEPR Discussion Papers 7801, C.E.P.R. Discussion Papers.
  2. Michael Cain & David Law & David Peel, 2003. "The Favourite-Longshot Bias, Bookmaker Margins and Insider Trading in a Variety of Betting Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 263-273, 07.
  3. Vasiliki Makropoulou & Raphael N. Markellos, 2011. "Optimal Price Setting In Fixed‐Odds Betting Markets Under Information Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(4), pages 519-536, 09.
  4. David Forrest & Ian Mchale, 2007. "Anyone for Tennis (Betting)?," The European Journal of Finance, Taylor & Francis Journals, vol. 13(8), pages 751-768.
  5. Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
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