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Applications of an SPRT-like Test in Pari-Mutuel Wagering


  • Lysa Porth

    (University of Manitoba)

  • Earl Rosenbloom

    (University of Manitoba)


Pari-mutuel wagering functions as a very simple financial market, and has therefore been important in studying market efficiency. In this study, an SPRT-like test reveals that probabilities from the win pool corrected for the favourite longshot bias using Asch and Quandt's regression equation can be used to exploit the exacta pool, and probabilities obtained from the exacta pool can be used to exploit the win pool. These finding differ from previously published studies that maintain that the win pool is largely efficient. Further, these findings mirror statistical arbitrage strategies utilized by hedge funds, where pricing inefficiencies are exploited between related assets.

Suggested Citation

  • Lysa Porth & Earl Rosenbloom, 2010. "Applications of an SPRT-like Test in Pari-Mutuel Wagering," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 4(2), pages 63-78, September.
  • Handle: RePEc:buc:jgbeco:v:4:y:2010:i:2:p:63-78

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    References listed on IDEAS

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    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism


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