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Market Efficiency in the Baseball Betting Market: The Case of Pete Rose

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  • Douglas Coate

    ()

Abstract

In this paper the betting on baseball games from April 8, 1987 to May 12, 1987 attributed to Pete Rose in the Dowd Report to the Commissioner of Baseball is analyzed. The results show Rose lost $4,200 betting on the Cincinnati Reds, the team which he managed; $36,000 betting on other teams in the National League, and $7,000 on his American League wagers. These losses, which include about $20,000 to $25,000 in transaction fees are small relative to the $450,000 in winning and losing bets (including the transaction fees) and are consistent with an informational efficient market. Assuming these bets are Rose's, his expertise (24 years as a player, 4 years as a manager, major league leader in games played) was not an advantage when betting on his own team, on other teams in his league that he studied and competed against, or on teams in the other major league.

Suggested Citation

  • Douglas Coate, 2008. "Market Efficiency in the Baseball Betting Market: The Case of Pete Rose," Working Papers Rutgers University, Newark 2008-003, Department of Economics, Rutgers University, Newark.
  • Handle: RePEc:run:wpaper:2008-003
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    File URL: http://www.ncas.rutgers.edu/workingpaper20083
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    Keywords

    Pete Rose; sports betting; market efficiency;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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