Noise, Information, and the Favorite-Longshot Bias in Parimutuel Predictions
نویسندگان
چکیده
منابع مشابه
Noise, Information, and the Favorite-Longshot Bias in Parimutuel Predictions
Betting and prediction markets provide a natural environment for testing theories of decision making under uncertainty and price formation. The uncertainty about the value of the assets traded in these markets is resolved unambiguously, and the outcome is observed publicly. In most cases it is also reasonable to presume that the realized outcomes are exogenous with respect to market prices. In ...
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In this paper it is shown that the combination of mental accounting and loss aversion can fundamentally changes people’s way of evaluating risky alternatives. The observation is applied in a market setting: Parimutuel betting markets. In parimutuel betting markets it has been found that for horses with lowest odds (favorites), market estimates of winning probabilities are smaller than objective...
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With a unique data set from New Zealand which allows us to assign each bet to individual bettors, we analyze the impact of experience on behavior and success in non-parimutuel (fixed odds) sports betting markets. We find that experienced bettors bet more on favorites than inexperienced bettors do. Average returns, which we use as success measure, increase with experience even after controlling ...
متن کاملThe Timing of Bets and the Favorite-Longshot Bias
We propose a dynamic model of parimutuel betting that addresses the following three empirical regularities: a sizeable fraction of bets is placed early, late bets are more informative than early bets, and proportionally too many bets are placed on longshots. Exploiting a similarity with Cournot oligopoly, we show that bettors have an incentive to bet early when they are large and act on common ...
متن کاملThe Favorite-Longshot Bias: An Overview of the Main Explanations
In betting markets, the expected return on longshot bets tends to be systematically lower than on favorite bets. This favorite-longshot bias is a widely documented empirical fact, often perceived to be an important deviation from the market efficiency hypothesis. This chapter presents an overview of the main theoretical explanations for this bias proposed in the literature. ∗London Business Sch...
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ژورنال
عنوان ژورنال: American Economic Journal: Microeconomics
سال: 2010
ISSN: 1945-7669,1945-7685
DOI: 10.1257/mic.2.1.58