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Sonic Thunder vs Brian the Snail : Fast-sounding racehorse names and prediction accuracy in betting exchange markets

Author

Listed:
  • Oliver Merz

    () (Department of Business Administration, University of Zurich)

  • Raphael Flepp

    () (Department of Business Administration, University of Zurich)

  • Egon Franck

    () (Department of Business Administration, University of Zurich)

Abstract

This paper examines the influence of objectively irrelevant information on prediction accuracy in horse-racing betting exchange markets. In horse racing, the name of a horse does not depend on the horse’s performance and is thus uninformative. We investigate the impact of fast-sounding horse names on prediction market price accuracy and betting returns. Using over 3 million horse bets, we find evidence that the winning probabilities of bets on horses with fast-sounding names are overstated, which impairs the prediction accuracy of such bets. This finding implies that the prices in betting exchange markets are not efficient, as prices become distorted by incorporating the misleading information from a horse’s fast-sounding name. This bias translates into significantly lower betting returns for horses classified as fast-sounding compared to the returns of all other horses.

Suggested Citation

  • Oliver Merz & Raphael Flepp & Egon Franck, 2019. " Sonic Thunder vs Brian the Snail : Fast-sounding racehorse names and prediction accuracy in betting exchange markets," Working Papers 384, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:zrh:wpaper:384
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    More about this item

    Keywords

    Market efficiency; Sports forecasting; Prediction markets; Betting industry; Horse Racing;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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