EXPLORING VARIATIONS IN ODDS BIAS ACROSS BETTING MEDIA

Authors

  • Michael A Smith Leeds Business School, Leeds Metropolitan University

DOI:

https://doi.org/10.5750/jgbe.v4i1.551

Keywords:

Betting Markets, Market Efficiency, Favourite-Longshot Bias

Abstract

The favourite-longshot bias is estimated for bookmaker odds from 9,006 UK Flat races, and compared to the bias evident in a sample of betting exchange odds from 6,000 races during the same period. The results are compared to similar studies of bias in Tote odds and US pari-mutuel odds. It is suggested that an information model only partially explains variations in the degree of bias between alternative betting media.

References

Bruce, A. C. and Johnson, J. E. V. (2000) ‘Investigating the Roots of the Favourite-Longshot Bias: An Analysis of Decision Making by Supply- and Demand-Side Agents’, Journal of Behavioral Decision Making, 13, pp. 413-430.

Busche, K. and Walls, W. D. (2001) ‘Breakage and betting market efficiency: Evidence from the horse track’, Applied Economics Letters, 8, pp. 601-604.

Crafts, N. F. R. (1985) ‘Some Evidence of Insider Knowledge in Horse Race Betting in Britain’, Economica, 52, 295-304.

Dowie, J. (1976) ‘On the Efficiency and Equity of Betting Markets’, Economica, 43, pp. 139-150.

Golec, J. and Tamarkin, M. (1998) ‘Bettors Love Skewness, Not Risk, at the Horse Track’, Journal of Political Economy, 106 (1), 205-225.

Gramm, M. K. and Owens, D. H. (2006) ‘Efficiency in pari-mutuel betting markets across wagering pools in the simulcast era’, Southern Economic Journal, 73, pp. 926-937.

Hausch, D. B., Ziemba W. T. and Rubinstein M. (1981) ‘Efficiency of the Market for Racetrack Betting’, Management Science, 27 (12), pp. 1435-1452.

Hurley, W. and McDonough, L. (1995) ‘A Note on the Hayek Hypothesis and the Favourite-Longshot Bias in Parimutuel Betting’, American Economic Review, 85 (4), pp. 949-955.

Koning, R.H. and van Veitzen, B. (2009) ‘Betting exchanges: the future of sports betting?’, International Journal of Sport Finance, 4(1), pp. 42-62.

Law, D. and Peel, D. A. (2002) ‘Insider Trading, Herding Behaviour, and Market Plungers in the British Horse Race Betting Market’, Economica, 69, pp. 327-338.

Rosett, R. N. (1965) ‘Gambling and Rationality’, Journal of Political Economy, 6, pp595-607.

Shin, H. S. (1991) ‘Optimal Betting Odds Against Insider Traders’, Economic Journal, 101, pp. 1179-1185.

Shin, H. S. (1992) ‘Prices of State Contingent Claims with Insider Traders, and the Favourite-Longshot Bias’, Economic Journal, 102, pp. 426-435.

Shin, H. S. (1993) ‘Measuring the Incidence of Insider Trading in a Market for State-contingent Claims’, Economic Journal, 103, pp. 1141-1153.

Smith, M.A., Paton, D. and Vaughan Williams, L.(2006) ‘Market Efficiency in Person-to-Person Betting’, Economica, 73, pp. 673-689.

Smith, M. A. and Vaughan Williams, L. (2008) ‘Betting Exchanges: A Technological Revolution in Sports Betting’, in Ziemba, W. T. (editor), Handbook of Sports and Lottery Markets, New York: North Holland.

Smith, M.A. and Vaughan Williams, L.(2010) ‘Forecasting horse race outcomes: New evidence on odds bias in UK betting markets’, International Journal of Forecasting, forthcoming. Available online 6th February 2010.

Snyder, W. W. (1978) ‘Horse Racing: Testing the Efficient Markets Model’, Journal of Finance, 33 (4), pp. 1109-1118.

Sobel, R. S. and Raines, S. T. (2003) ‘An Examination of the Empirical Derivatives of the Favourite–Longshot Bias in Racetrack Betting’, Applied Economics, 35, pp. 371–85.

Sung, M. C., Johnson, J. E.V., and Dror, I. E.(2009) ‘Complexity as a Guide to Understanding Decision Bias: A Contribution to the Favorite-Longshot Bias Debate’, Journal of Behavioural Decision-Making, 22, pp 318-337.

Totesport (2003) ‘Tote Announce Deductions in Win and Place Pools’, Press release available at: http://corporate.totesport.com/ media/press_releases /corporatetote-deductions.asp. (Accessed: 27th April 2007).

Vaughan Williams, L. and Paton, D. (1997) ‘Why is there a Favourite-Longshot Bias in British Racetrack Betting Markets?’, Economic Journal, 107, pp. 150-158.

Weitzman, M. (1965) ‘Utility Analysis and Group Behaviour: An Empirical Study’, Journal of Political Economy, 73 (1), pp. 18-26.

Published

2013-01-02

Issue

Section

Articles