Late Money and Betting Market Efficiency: Evidence from Australia

Authors

  • Marshall Gramm
  • C. Nicholas McKinney Department of Economics, Rhodes College, 2000 North Parkway, Memphis, TN 38112
  • Randall E. Parker Department of Economics, East Carolina University, Brewster A-422, Greenville, NC 27858

DOI:

https://doi.org/10.5750/jgbe.v10i2.1246

Abstract

 This paper examines the empirical importance of late money on market efficiency in horse race gambling. Our inquiry into the effect of late money on parimutuel pools uses data from Australian thoroughbred horse races over the entire 2006 racing season and includes every race at all thoroughbred tracks. This amounts to 14,854 races with an average of 10.37 starters per race. The evidence overwhelmingly supports the hypotheses that late money is smart money and late money improves market efficiency.

References

P Asch, B G Malkiel and R E Quandt ‘Racetrack betting and informed behavior’ (1982) 10 Journal of Financial Economics 187–94

K Busche and W D Walls ‘Decision cost and betting market efficiency’ (2000) 12 Rationality and Society 477–92

L Coleman ‘New light on the longshot bias’ (2004) 36 Applied Economics 315–26

N F R Crafts ‘Some evidence of insider knowledge in horse race betting in Britain’ (1985) 52 Economica 295–304

M Gramm and D H Owens ‘Efficiency in pari-mutuel betting markets across wagering pools in the Simulcast Era’ (2006) 72 Southern Economic Journal 926–37

M Gramm and C N McKinney (2009) ‘The effect of late money on betting market efficiency’ (2009) 16 Applied Economics Letters 369-72

D A Harville (1973) ‘Assigning probabilities to the outcomes of multi-entry competitons’ (1973) 69 Journal of the American Stastistical Association 446–52

M Ottaviani and P N Sorensen ‘The Timing of Parimutuel Bets’ (2006) Unpublished paper

M Ottaviani and P N Sorensen ‘Late Informed Betting and the Favourite-Longshot Bias’ (2003) C.E.P.R. Discussion Papers 4092

R D Sauer ‘The economics of wagering markets’ (1998) 36 Journal of Economic Literature 2021–64

Published

2016-10-28

Issue

Section

Articles