Determinants of betting market efficiency
Previous studies of efficient markets in parimutuel betting isolated only one race characteristic, determining efficiency by comparing subjective to objective probabilities of different groupings. By incorporating regression analysis and looking at a wide range of race specific variables, this study is able to isolate various factors which influence efficiency. Using a data set of 5020 races at 18 US racetracks, a standard favourite-longshot bias was found, which diminishes for races with larger pools and more horses in a field, and increases for races with higher quality fields and maiden races. When track-specific characteristics are factored out, similar results occur and it is also found that races on grass reduce the bias.
Volume (Year): 12 (2005)
Issue (Month): 3 ()
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References listed on IDEAS
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- Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-74, Spring.
- David Paton & Leighton Vaughan Williams, 1998. "Do betting costs explain betting biases?," Applied Economics Letters, Taylor & Francis Journals, vol. 5(5), pages 333-335.
- Russell Sobel & S. Travis Raines, 2003. "An examination of the empirical derivatives of the favourite-longshot bias in racetrack betting," Applied Economics, Taylor & Francis Journals, vol. 35(4), pages 371-385.
- Busche, Kelly & Hall, Christopher D, 1988. "An Exception to the Risk Preference Anomaly," The Journal of Business, University of Chicago Press, vol. 61(3), pages 337-46, July.
- Asch, Peter & Malkiel, Burton G. & Quandt, Richard E., 1982. "Racetrack betting and informed behavior," Journal of Financial Economics, Elsevier, vol. 10(2), pages 187-194, July.
- Kelly Busche & W. David Walls, 2001. "Breakage and betting market efficiency: evidence from the horse track," Applied Economics Letters, Taylor & Francis Journals, vol. 8(9), pages 601-604.
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