Exploring decision makers' use of price information in a speculative market

Johnson, Johnnie E.V., Jones, Owen and Tang, Leilei (2006) Exploring decision makers' use of price information in a speculative market. Management Science, 52, (6), 897-908. (doi:10.1287/mnsc.1060.0506).


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Original Publication URL: http://dx.doi.org/10.1287/mnsc.1060.0506


We explore the extent to which the decisions of participants in a speculative market effectively account for information contained in prices and price movements. The horse race betting market is an ideal environment to explore these issues. A conditional logit model is constructed to determine winning probabilities based on bookmakers' closing prices and the time-indexed movement of prices to the market close. We incorporate a technique for extracting predictors from price (odds) curves using orthogonal polynomials. The results indicate that closing prices do not fully incorporate market price information, particularly information that is less readily discernable by market participants.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1287/mnsc.1060.0506
ISSNs: 0025-1909 (print)
Related URLs:
Keywords: market efficiency, information, modeling price curves, betting, wagering
Subjects: H Social Sciences > HG Finance
Divisions : University Structure - Pre August 2011 > School of Management
ePrint ID: 35775
Accepted Date and Publication Date:
Date Deposited: 20 Jun 2006
Last Modified: 31 Mar 2016 12:03
URI: http://eprints.soton.ac.uk/id/eprint/35775

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