An examination of the determinants of biased behaviour in a market for state contingent claims
An examination of the determinants of biased behaviour in a market for state contingent claims
We develop a model to explain the differential incidence of the favourite-longshot bias in parallel sectors of the pari-mutuel horserace betting market. Hypotheses are derived from the model and these are tested, using UK data, to explore the origins of the bias. Significant variations in the bias are discovered between market sectors on- and off-racetrack. These results shed light on competing demand-side explanations for the favourite-longshot bias and suggest that it is affected by a combination of behavioural and operational features of the markets and the types of bettors (informed and leisure) which they attract.
market efficiency, favourite-longshot bias, betting markets
282-303
Bruce, Alistair C.
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Johnson, Johnnie E.V.
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Peirson, John D.
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Yu, Jiejun
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April 2009
Bruce, Alistair C.
acee9acc-fd28-44bf-8781-7a9d135319ac
Johnson, Johnnie E.V.
6d9f1a51-38a8-4011-a792-bfc82040fac4
Peirson, John D.
4a82b240-f6fe-4b44-bae6-eb1ef84d8bea
Yu, Jiejun
ad186cba-9755-43ef-8611-087fe72f8293
Bruce, Alistair C., Johnson, Johnnie E.V., Peirson, John D. and Yu, Jiejun
(2009)
An examination of the determinants of biased behaviour in a market for state contingent claims.
Economica, 76 (302), .
(doi:10.1111/j.1468-0335.2008.00741.x).
Abstract
We develop a model to explain the differential incidence of the favourite-longshot bias in parallel sectors of the pari-mutuel horserace betting market. Hypotheses are derived from the model and these are tested, using UK data, to explore the origins of the bias. Significant variations in the bias are discovered between market sectors on- and off-racetrack. These results shed light on competing demand-side explanations for the favourite-longshot bias and suggest that it is affected by a combination of behavioural and operational features of the markets and the types of bettors (informed and leisure) which they attract.
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Published date: April 2009
Venue - Dates:
The Growth of Gambling and Prediction Markets: Economic and Financial Implications, Palm Desert, USA, United States, 2007-05-20 - 2007-05-22
Keywords:
market efficiency, favourite-longshot bias, betting markets
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Local EPrints ID: 153443
URI: http://eprints.soton.ac.uk/id/eprint/153443
ISSN: 0013-0427
PURE UUID: 8af5ea05-7d71-4278-ac77-44d534b10209
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Date deposited: 20 May 2010 08:20
Last modified: 14 Mar 2024 01:28
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Contributors
Author:
Alistair C. Bruce
Author:
Johnnie E.V. Johnson
Author:
John D. Peirson
Author:
Jiejun Yu
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