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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), pp. 897-908. (doi:10.1287/mnsc.1060.0506).

Record type: Article


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.

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Published date: 2006
Keywords: market efficiency, information, modeling price curves, betting, wagering


Local EPrints ID: 35775
ISSN: 0025-1909
PURE UUID: 8edae791-ef80-48e2-bcbd-6c073e70f5b6

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Date deposited: 20 Jun 2006
Last modified: 17 Jul 2017 15:46

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Author: Owen Jones
Author: Leilei Tang

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