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Tests of the Efficiency of Racetrack Betting Using Bookmaker Odds

Author

Listed:
  • Ron Bird

    (Commerce Department, Australian National University, Canberra, ACT 2601, Australia)

  • Michael McCrae

    (Commerce Department, Australian National University, Canberra, ACT 2601, Australia)

Abstract

The objective of this study is to evaluate the informational efficiency of the market for betting on horse races. Whereas the price data used in previous studies have been drawn largely from totalizator (parimutuel) odds, the data used in this study are derived from bookmaker odds. The availability of a series of prices throughout betting facilitates the use of filter tests to evaluate market efficiency. We conclude that this gambling market is efficient in the use of information supplied via both the movements in odds during the course of betting and the selections of newspaper tipsters. However, there is evidence to suggest that those with access to private information can earn positive returns from gambling.

Suggested Citation

  • Ron Bird & Michael McCrae, 1987. "Tests of the Efficiency of Racetrack Betting Using Bookmaker Odds," Management Science, INFORMS, vol. 33(12), pages 1552-1562, December.
  • Handle: RePEc:inm:ormnsc:v:33:y:1987:i:12:p:1552-1562
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    File URL: http://dx.doi.org/10.1287/mnsc.33.12.1552
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    Citations

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    Cited by:

    1. Smith, Michael A. & Paton, David & Williams, Leighton Vaughan, 2009. "Do bookmakers possess superior skills to bettors in predicting outcomes?," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 539-549, August.
    2. Paton, David & Vaughan Williams, Leighton & Fraser, Stuart, 1999. "Regulating Insider Trading in Betting Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 51(3), pages 237-241, July.
    3. Stekler, H.O. & Sendor, David & Verlander, Richard, 2010. "Issues in sports forecasting," International Journal of Forecasting, Elsevier, vol. 26(3), pages 606-621, July.
      • Herman O. Stekler & David Sendor & Richard Verlander, 2009. "Issues in Sports Forecasting," Working Papers 2009-002, The George Washington University, Department of Economics, Research Program on Forecasting.
    4. Vaughan Williams, Leighton, 1999. "Information Efficiency in Betting Markets: A Survey," Bulletin of Economic Research, Wiley Blackwell, vol. 51(1), pages 1-30, January.
    5. Vaughan Williams, Leighton & Stekler, Herman O., 2010. "Sports forecasting," International Journal of Forecasting, Elsevier, vol. 26(3), pages 445-447, July.
      • Herman O. Stekler, 2007. "Sports Forecasting," Working Papers 2007-001, The George Washington University, Department of Economics, Research Program on Forecasting, revised Jan 2007.
    6. Les Coleman, 2007. "Just How Serious is Insider Trading? An Evaluation using Thoroughbred Wagering Markets," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 1(1), pages 31-55, February.
    7. Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 315-326.
    8. Timothy J. Brailsford & Philip K. Gray & Stephen A. Easton & Stephen F. Gray, 1995. "The Efficiency of Australian Football Betting Markets," Australian Journal of Management, Australian School of Business, vol. 20(2), pages 167-195, December.
    9. John Peirson & Michael A. Smith, 2010. "Symposium Expert Analysis and Insider Information in Horse Race Betting: Regulating Informed Market Behavior," Southern Economic Journal, Southern Economic Association, vol. 76(4), pages 976-992, April.
    10. Williams, Leighton Vaughan & Paton, David, 1997. "Why Is There a Favourite-Longshot Bias in British Racetrack Betting Markets?," Economic Journal, Royal Economic Society, vol. 107(440), pages 150-158, January.
    11. Ian Milliner & Paul White & Don J. Webber, 2009. "A Statistical Development of Fixed Odds Betting Rules in Soccer," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 3(1), pages 89-99, April.
    12. Johnnie E. V. Johnson & Owen Jones & Leilei Tang, 2006. "Exploring Decision Makers' Use of Price Information in a Speculative Market," Management Science, INFORMS, vol. 52(6), pages 897-908, June.
    13. Forrest, David & Simmons, Robert, 2000. "Forecasting sport: the behaviour and performance of football tipsters," International Journal of Forecasting, Elsevier, vol. 16(3), pages 317-331.
    14. John Peirson, 2008. "Expert Analysis and Insider Information in Horse Race Betting: Regulating Informed Market Behaviour," Studies in Economics 0819, School of Economics, University of Kent.

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    Keywords

    efficiency; gambling markets; bookmaker odds;

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