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Are the odds odd? Positive return evidence in German horse race betting

Philipp Heinrich Hoff


The article deals with the question, if odds derived from the behavior of bettors in a pari-mutuel setting really reflect the chances of winning for a particular horse in a particular race. Using a unique data set with more than 46,000 race observations from Germany for the years 2001 to 2003 the paper presents evidence on the favorite long-shot bias, evaluates the predictive power of totalizator odds, uses a binary logistic regression model to predict probabilities of winning and finally suggests three wagering strategies that actually yield positive returns in a hold-out oriented analytical setting.



asymmetric information, binary logistic regression

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