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Racetrack Betting–An Example Of A Market With Efficient Arbitrage

In: Efficiency Of Racetrack Betting Markets

Author

Listed:
  • Jay R. Ritter

    (College of Commerce and Business Administration, University of Illinois at Urbana-Champaign, USA)

Abstract

A model of racetrack betting behavior is set forward, and its implications tested, albeit with a small sample size. The model is consistent with risk-loving on the part of bettors. A simple betting rule [essentially a crude version of the Dr. Z system, describd by Ziemba and Hausch (1984)] is then tested, with evidence put forward that an unexploited profit opportunity may exist. When uncertainty is introduced, however, it is found that the profits vanish, a result consistent with the joint hypothesis of market efficiency and the model of betting behavior described in the paper.

Suggested Citation

  • Jay R. Ritter, 2008. "Racetrack Betting–An Example Of A Market With Efficient Arbitrage," World Scientific Book Chapters, in: Donald B Hausch & Victor SY Lo & William T Ziemba (ed.), Efficiency Of Racetrack Betting Markets, chapter 42, pages 431-441, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812819192_0042
    as

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