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).

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Description/Abstract

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)
Keywords: market efficiency, information, modeling price curves, betting, wagering
Subjects:
ePrint ID: 35775
Date :
Date Event
2006Published
Date Deposited: 20 Jun 2006
Last Modified: 16 Apr 2017 22:08
Further Information:Google Scholar
URI: http://eprints.soton.ac.uk/id/eprint/35775

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