IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v41y1995i6p1048-1059.html
   My bibliography  Save this article

The Application of Ranking Probability Models to Racetrack Betting

Author

Listed:
  • Victor S. Y. Lo

    (Mercer Management Consulting, Inc., 33 Hayden Avenue, Lexington Massachusetts 02173)

  • John Bacon-Shone

    (Department of Statistics and Social Sciences, Research Centre, The University of Hong Kong, Pokfulam Road, Hong Kong)

  • Kelly Busche

    (School of Economics, The University of Hong Kong, Pokfulam Road, Hong Kong)

Abstract

Hausch et al. (HZR) (Hausch, D. B., W. T. Ziemba, M. Rubinstein. 1981. Efficiency of the market for racetrack betting. Management Sci. 27 1435--1452.) developed a betting system that demonstrated positive profits at two racetracks. The system assumes running times are distributed exponentially, but other distributions for running times (Henery [Henery, R. J. 1981. Permutation probabilities as models for horse races. J. Roy. Statist. Soc. B 43(1) 86--91.] and Stern [Stern, H. 1990. Models for distributions on permutations. J. Amer. Statist. Assoc. 85(410) 558--564.]) have been shown to produce a better fit in Bacon-Shone et al. (1992a), Lo (Lo, V. S. Y. 1994. Application of running time distribution models in Japan. D. B. Hausch, V. S. Y. Lo, W. T. Ziemba, eds. Efficiency of Racetrack Betting Markets. Academic Press, 237--247.), and Lo and Bacon-Shone (Lo, V. S. Y., J. Bacon-Shone. 1994. A comparison between two models for predicting ordering probabilities in multi-entry competitions. The Statistician 43(2) 317--327.) using data from Hong Kong, the Meadowlands, and Japan. The better fit is at the cost of severely increased complexity in computing ranking probabilities, though. In response, Lo and Bacon-Shone (Lo, V. S. Y., J. Bacon-Shone. 1992. An Approximation to Ordering Probabilities of Multi-entry Competitions. Research Report 16, Department of Statistics, University of Hong Kong.) proposed a simple model of computing ranking probabilities which closely approximates those based on the Henery and the Stern models and fits the data as well. This paper couples the Lo and Bacon-Shone model and the HZR system. For data sets from the United States and Hong Kong, we show improved profit over the HZR system at lower levels of risk using final betting data assuming zero computational costs. With data from Japan, our model shows little difference in profits from the HZR system.

Suggested Citation

  • Victor S. Y. Lo & John Bacon-Shone & Kelly Busche, 1995. "The Application of Ranking Probability Models to Racetrack Betting," Management Science, INFORMS, vol. 41(6), pages 1048-1059, June.
    • Handle: RePEc:inm:ormnsc:v:41:y:1995:i:6:p:1048-1059
    DOI: 10.1287/mnsc.41.6.1048
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.41.6.1048
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.41.6.1048?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Piotr Borowski & Marcin Chlebus, 2021. "Machine learning in the prediction of flat horse racing results in Poland," Working Papers 2021-13, Faculty of Economic Sciences, University of Warsaw.
    2. David Paton & Leighton Vaughan Williams, 2001. "Monopoly Rents and Price Fixing in Betting Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(3), pages 265-278, November.
    3. Bjerksund, Petter & Stensland, Gunnar, 2017. "Profitable Robot Strategies in Pari-Mutuel Betting," Discussion Papers 2017/6, Norwegian School of Economics, Department of Business and Management Science.
    4. Bernardo, Giovanni & Ruberti, Massimo & Verona, Roberto, 2015. "Testing semi-strong efficiency in a fixed odds betting market: Evidence from principal European football leagues," MPRA Paper 66414, University Library of Munich, Germany.
    5. Lo Victor S & Bacon-Shone John, 2008. "Probability and Statistical Models for Racing," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 4(2), pages 1-14, April.
    6. M B Wright, 2009. "50 years of OR in sport," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(1), pages 161-168, May.
    7. Strumbelj, E. & Sikonja, M. Robnik, 2010. "Online bookmakers' odds as forecasts: The case of European soccer leagues," International Journal of Forecasting, Elsevier, vol. 26(3), pages 482-488, July.
    8. Marshall Gramm & C. Nicholas McKinney & Douglas Owens, 2008. "The efficiency of exotic wagers in racetrack betting," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 89-97.
    9. M. Cain & D. Law & D. A. Peel, 2003. "Some analysis of the properties of the Harville place formulae when allowance is made for the favourite-long shot bias employing Shin Win probabilities," Applied Economics Letters, Taylor & Francis Journals, vol. 10(1), pages 53-57.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:41:y:1995:i:6:p:1048-1059. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.