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Racial biases and market outcomes: "White men can't jump," but would you bet on it?

  • Igan, Deniz
  • Pinheiro, Marcelo
  • Smith, John

We identify an otherwise efficient market in which racial biases affect market outcomes. In particular, we examine data on point spreads for NBA games over the 15 seasons from 1993-94 to 2007-08. We find evidence that a more black team tends to face a larger point spread and that these teams perform worse against the spread. These biased outcomes are significantly large and persistent so that we are able to identify profit opportunities. We also find evidence that the biased spread is set by the bookmakers rather than being moved as a result of excessive betting on the more black team. These findings are consistent with information-based discrimination where mistaken beliefs persist even though they are financially disadvantageous, and, more importantly, easily recognizable and correctable.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36069.

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Date of creation: 19 Jan 2012
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Handle: RePEc:pra:mprapa:36069
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