Symposium Expert Analysis and Insider Information in Horse Race Betting: Regulating Informed Market Behavior
We present a new model analyzing the effect of uncertainty faced by bookmakers. It is shown that bettors with inside information or expert analysis decrease the odds set by profitmaximizing bookmakers. Data on previously unraced 2-year-old horses and those that have raced previously are used to examine the impact of the greater possibility of insider information on odds bias in relation to unraced horses. The probability of an unraced 2-year-old winning is found to be on average 16% higher than that of a raced 2-year-old horse with the same odds. This effect decreases as the probability of winning increases. The latter effect indicates a possible contribution to the favorite-longshot bias, and the former shows the importance of insider information in the setting of market odds. The regulation of the use of insider information is discussed in light of the similar impact of insider information and expert analysis on bookmaker odds.
Volume (Year): 76 (2010)
Issue (Month): 4 (April)
|Contact details of provider:|| Web page: http://www.southerneconomic.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Bruno Jullien & Bernard Salanie, 2000.
"Estimating Preferences under Risk: The Case of Racetrack Bettors,"
Journal of Political Economy,
University of Chicago Press, vol. 108(3), pages 503-530, June.
- Bruno Jullien & Bernard Salanié, 1997. "Estimating Preferences under Risk : The Case of Racetrack Bettors," Working Papers 97-39, Centre de Recherche en Economie et Statistique.
- Hurley, William & McDonough, Lawrence, 1995. "A Note on the Hayek Hypothesis and the Favorite-Longshot Bias in Parimutuel Betting," American Economic Review, American Economic Association, vol. 85(4), pages 949-55, September.
- Paton, David & Vaughan Williams, Leighton & Fraser, Stuart, 1999. "Regulating Insider Trading in Betting Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 51(3), pages 237-41, July.
- Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
- Law, David & Peel, David A, 2002. "Insider Trading, Herding Behaviour and Market Plungers in the British Horse-Race Betting Market," Economica, London School of Economics and Political Science, vol. 69(274), pages 327-38, May.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 315-326.
- Schnytzer, Adi & Shilony, Yuval, 1995. "Inside Information in a Betting Market," Economic Journal, Royal Economic Society, vol. 105(431), pages 963-71, July.
- Ali, Mukhtar M, 1977. "Probability and Utility Estimates for Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 803-15, August.
When requesting a correction, please mention this item's handle: RePEc:sej:ancoec:v:76:4:y:2010:p:976-992. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Razzolini)
If references are entirely missing, you can add them using this form.