IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article

Symposium Expert Analysis and Insider Information in Horse Race Betting: Regulating Informed Market Behavior

  • John Peirson

    ()

    (Department of Economics, Keynes College, University of Kent, Canterbury, Kent CT2 7NP, UK.)

  • Michael A. Smith

    ()

    (Leeds Business School, Bronte Building, Leeds Metropolitan University, Leeds LS1 3HE, UK.)

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dx.doi.org/10.4284/sej.2010.76.4.976
Download Restriction: no

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2010)
Issue (Month): 4 (April)
Pages: 976-992

as
in new window

Handle: RePEc:sej:ancoec:v:76:4:y:2010:p:976-992
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.:

as in new window
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
  6. 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.
  7. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  8. Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 315-326.
  9. Schnytzer, Adi & Shilony, Yuval, 1995. "Inside Information in a Betting Market," Economic Journal, Royal Economic Society, vol. 105(431), pages 963-71, July.
  10. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

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 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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.