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Efficiency and Profitability in Exotic Bets

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  • Asch, Peter
  • Quandt, Richard E

Abstract

The efficiency and profitability of exotic racetrack bets such as exactas and daily doubles are examined. Efficiency is understood to mean that above average returns cannot be made in the long run once risk is appropriately controlled for. The markets in question are found not to be efficient; the inefficiencies, however, are insufficient to permit simple strategies to show a consistent profit. Some evidence of "smart money" exists in that holders of inside information may bet on exactas rather than equivalent standard bets in order to avoid signaling their actions to the betting public. Copyright 1987 by The Review of Economic Studies Limited.

Suggested Citation

  • Asch, Peter & Quandt, Richard E, 1987. "Efficiency and Profitability in Exotic Bets," Economica, London School of Economics and Political Science, vol. 54(215), pages 289-298, August.
  • Handle: RePEc:bla:econom:v:54:y:1987:i:215:p:289-98
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    Cited by:

    1. Mild, Andreas & Waitz, Martin & Wöckl, Jürgen, 2015. "How low can you go? — Overcoming the inability of lenders to set proper interest rates on unsecured peer-to-peer lending markets," Journal of Business Research, Elsevier, vol. 68(6), pages 1291-1305.
    2. Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Long Shot Bias: Is it Risk-Love or Misperceptions?," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 723-746, August.
    3. Bill Woodland & Linda Woodland, 1999. "Expected utility, skewness, and the baseball betting market," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 337-345.
    4. Russell Sobel & S. Travis Raines, 2003. "An examination of the empirical derivatives of the favourite-longshot bias in racetrack betting," Applied Economics, Taylor & Francis Journals, vol. 35(4), pages 371-385.

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