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Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market

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  • John Gandar
  • Richard Zuber
  • R. Stafford Johnson

Abstract

This paper tests for the presence of the favourite-longshot bias in a new setting. This bias #150 the tendency for bettors to underbet favourites and overbet longshots #150 has been found in most studies of pari-mutuel and bookmaking betting markets in the USA, the UK and Australia. However, there is growing evidence that in at least some pari-mutuel betting markets there is no favourite-longshot bias. This paper examines the previously unexplored New Zealand pari-mutuel betting market on horse races for evidence of this bias. Utilizing a large sample of recent New Zealand thoroughbred horse races, it is found that while early, off-track bettors price this bias into odds, late (on-and off-track) bettors eliminate much of the bias by the close of betting. That is, the results reinforce the view that not all pari-mutuel betting markets are characterized by a favourite-longshot bias at the close of betting. Evidence is also found that late bettors in this market are smart bettors.

Suggested Citation

  • John Gandar & Richard Zuber & R. Stafford Johnson, 2001. "Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1621-1629.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:13:p:1621-1629
    DOI: 10.1080/00036840010012951
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    Cited by:

    1. Martin Kukuk & Stefan Winter, 2008. "An Alternative Explanation of the Favorite-Longshot Bias," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 2(2), pages 79-96, September.
    2. Rodriguez Alvaro, 2011. "Computing the Probability of Winning a Competition with an Application to Horse Races," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 7(3), pages 1-11, July.
    3. Jinook Jeong & Jee Young Kim & Yoon Jae Ro, 2017. "On the Efficiency of Racetrack Betting Market: A New Test for the Favorite-Longshot Bias," Working papers 2017rwp-106, Yonsei University, Yonsei Economics Research Institute.
    4. Matthew Amor & William Griffiths, 2003. "Modelling the Behaviour and Performance of Australian Football Tipsters," Department of Economics - Working Papers Series 871, The University of Melbourne.
    5. Stefan Winter & Martin Kukuk, 2008. "Do horses like vodka and sponging? - On market manipulation and the favourite-longshot bias," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 75-87.

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