HOME BIAS AND INTERNATIONAL BETTING MARKETS: CAN INSTITUTIONAL CONSTRAINTS AND BEHAVIORAL BIASES LEAD TO ARBITRAGE PROFITS?

Authors

  • Ludwig Chincarini Department of Economics, Pomona College
  • Christina Contreras Department of Economics, Pomona College

DOI:

https://doi.org/10.5750/jgbe.v4i3.560

Keywords:

Home bias, market efficiency, international betting markets, behavioral economics

Abstract

The international sports betting markets are becoming more global, but there is still a large concentration of local bettors in gambling markets of individual countries. Home loyalty and other patterns of human behavior might lead to odds for international competitions being different in different countries with less favorable odds being quoted in the home country; the home bias effect. In this paper we explain the logic of this phenomena and examine a small data set to show the existence of the bias in three different sports: tennis, golf, and European football. We also suggest ideas for a more thorough investigation of the home bias phenomenon.

References

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French, Kenneth R. and James M. Poterba. “Investor Diversification and Inter-national Equity Markets”. The American Economic Review, pages 222–226, May 1991.

Lewis, Karen. “Trying To Explain Home Bias in Equities and Consumption”. Journal of Economic Literature, 37:571–608, June 1999.

Nieuwerburgh, Stijn Van and Laura Veldkamp. “Information Immobility and the Home Bias Puzzle”. Journal of Finance, 64:1187–1215, June 2009.

Rhode, Paul W. and Koleman Strumpf. “Manipulating Political Stock Markets:A Field Experiment and a Century of Observational Data”. Working Paper, pages 1–79, October 2008.

Published

2013-01-02

Issue

Section

Articles