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Favourite–longshot biases in a pari-mutuel system without cross arbitrage

Author

Listed:
  • Kazuki Okamoto

    (JIM Technology Corporation)

  • Mototsugu Fukushige

    (Graduate School of Economics, Osaka University)

Abstract

The Japan Racing Association supplies bracket quinellas and quinellas. Repdigit-type bracket quinellas and their corresponding quinellas lead to the same winning probabilities, with both types of quinellas operating separately under a pari-mutuel system. However, the actual odds for these quinellas are different. Empirical testing suggests that there is no possibility for arbitrage between these tickets and that the repdigit-type bracket quinella exhibits a stronger favorite–longshot bias than the quinella. This implies that the favorite–longshot bias is not arbitraged across the separately operated pari-mutuel system and is always stronger for bracket-type quinellas than quinellas.

Suggested Citation

  • Kazuki Okamoto & Mototsugu Fukushige, 2022. "Favourite–longshot biases in a pari-mutuel system without cross arbitrage," Economics Bulletin, AccessEcon, vol. 42(1), pages 203-207.
    • Handle: RePEc:ebl:ecbull:eb-21-00684
    as

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    References listed on IDEAS

    as
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    5. W. David Walls & Kelly Busche, 2003. "Broken odds and the favourite-longshot bias in parimutuel betting: a direct test," Applied Economics Letters, Taylor & Francis Journals, vol. 10(5), pages 311-314, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    favourite–longshot bias; horse racing; quinella; bracket quinella;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D1 - Microeconomics - - Household Behavior

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