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Profitable Robot Strategies in Pari-Mutuel Betting

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  • Bjerksund, Petter

    () (Dept. of Business and Management Science, Norwegian School of Economics)

  • Stensland, Gunnar

    () (Dept. of Business and Management Science, Norwegian School of Economics)

Abstract

We have collected odds and results from 7 474 horse races in Norway and Sweden for a period of approximately 1.5 years. Based on the odds from the win game, we construct a profitable betting strategy for the corresponding triple game. Given a 30% track take, the existence of a profitable strategy is surprising. A robot is typically needed to identify and exploit underrated bets. We argue that the existence of heterogeneous beliefs between players in the market might form a basis for profitable betting strategies. We did expect that bigger pools (more liquidity) would remove this anomaly. That is not the case. More players, and thereby bigger pools, increases the profitability of the system.

Suggested Citation

  • Bjerksund, Petter & Stensland, Gunnar, 2017. "Profitable Robot Strategies in Pari-Mutuel Betting," Discussion Papers 2017/6, Norwegian School of Economics, Department of Business and Management Science.
  • Handle: RePEc:hhs:nhhfms:2017_006
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    File URL: http://hdl.handle.net/11250/2437106
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    References listed on IDEAS

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    1. Donald B. Hausch & William T. Ziemba & Mark Rubinstein, 1981. "Efficiency of the Market for Racetrack Betting," Management Science, INFORMS, vol. 27(12), pages 1435-1452, December.
    2. Nicolae B. Gârleanu & Lasse H. Pedersen, 2015. "Efficiently Inefficient Markets for Assets and Asset Management," NBER Working Papers 21563, National Bureau of Economic Research, Inc.
    3. Martin Weitzman, 2008. "Utility Analysis And Group Behavior An Empirical Study," World Scientific Book Chapters,in: Efficiency Of Racetrack Betting Markets, chapter 9, pages 47-55 World Scientific Publishing Co. Pte. Ltd..
    4. Ali, Mukhtar M, 1977. "Probability and Utility Estimates for Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 803-815, August.
    5. 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 949-955, September.
    6. Victor S. Y. Lo & John Bacon-Shone & Kelly Busche, 1995. "The Application of Ranking Probability Models to Racetrack Betting," Management Science, INFORMS, vol. 41(6), pages 1048-1059, June.
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    More about this item

    Keywords

    Horse races; low odds bias; heterogeneous beliefs;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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