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Home Bias and Prediction Markets: Evidence from the Racetrack

Author

Listed:
  • Paul Scanlon

    () (Department of Economics, Trinity College Dublin, Ireland)

Abstract

Significant horse races taking place in Britain and France frequently involve participants from both countries. The existence of distinct and segmented wagering markets in each country facilitates the study of potentially different market behaviors. Using over eight hundred observations from these markets, I show the existence of a pronounced home bias, with participants in domestic markets favoring horses trained domestically. The bias is large, statistically significant, and becomes more pronounced as betting odds rise. Restricting the analysis to foreign trained horses that have already performed well in domestic races, I find the bias virtually disappears suggesting a role for learning and informational asymmetries.

Suggested Citation

  • Paul Scanlon, 2011. "Home Bias and Prediction Markets: Evidence from the Racetrack," Trinity Economics Papers tep2211, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduee:tep2211
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    File URL: http://www.tcd.ie/Economics/TEP/2011/TEP2211.pdf
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    More about this item

    Keywords

    Home bias; Prediction Markets; Market efficiency;

    JEL classification:

    • G0 - Financial Economics - - General
    • F3 - International Economics - - International Finance

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