Inside Information in a Betting Market

Schnytzer, Adi; Shilony, Yuval

doi:10.2307/2235162

Cited by 53 publications

(39 citation statements)

References 13 publications

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“…5 A horse is said to be plunged when its odds suddenly decrease meaningfully owing to large bets placed on the same horse with different bookmakers simultaneously. Schnytzer and Shilony (1995) show that plunges contain inside information. The simple average of these values is a variable that measures the extent of insider trading as estimated by SLM, is shown in Table II.…”

Section: Methodsmentioning

confidence: 96%

The impact of insider trading on forecasting in a bookmakers’ horse betting market

Schnytzer

Lamers

Makropoulou

2010

International Journal of Forecasting

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Abstract.This paper uses a new variable based on estimates of insider trading to forecast the outcome of horse races. We base our analysis on Schnytzer, Lamers and Makropoulou (2008) who showed that inside trading in the 1997-1998 Australian racetrack betting market represents somewhere between 20 and 30 percent of all trading in this market. They show that the presence of insiders leads opening prices to deviate from true winning probabilities. Under these circumstances, forecasting of race outcomes should take into account an estimate of the extent of insider trading per horse. We show that the added value of this new variable for profitable betting is sufficient to reduce the losses when only prices are taken into account. Since the only variables taken into account in either Schnytzer, Lamers and Makropoulou (2008) or this paper are price data, this is tantamount to a demonstration that the market is, in practice, weak-form efficient.

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Section: Methodsmentioning

confidence: 96%

The impact of insider trading on forecasting in a bookmakers’ horse betting market

Schnytzer

Lamers

Makropoulou

2010

International Journal of Forecasting

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“…There are a number of reasons for this. The first is that they will wish to secure their return (by betting at odds fixed at the time they place their bet) without the danger of a herding effect eroding their gains (Sauer, 1998;Schnytzer and Shilony, 1995). In the pari-mutuel market, a pool of bets is formed and the odds are determined by the relative amounts bet on each horse, bets being settled at the odds prevailing at the close of the market.…”

Section: Data Descriptionmentioning

confidence: 99%

Time is money: Costing the impact of duration misperception in market prices

Tang

McGroarty

et al. 2016

European Journal of Operational Research

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We explore whether, and to what extent, traders in a real world financial market, where participants' judgements are reportedly well calibrated, are subject to duration misperception. To achieve this, we examine duration misperception in the horserace betting market. We develop a two-stage algorithm to predict horses' winning probabilities that account for a duration-related factor that is known to affect horses' winning prospects. The algorithm adapts survival analysis and combines it with the conditional logit model. Using a dataset of 4736 horseraces and the lifetime career statistics of the 53295 horses running in these races, we demonstrate that prices fail to discount fully information related to duration since a horse's last win. We show that this failure is extremely costly, since a betting strategy based on the predictions arising from the model shows substantial profits (932.5% and 16.27%, with and without reinvestment of winnings, respectively). We discuss the important implications of duration neglect in the wider economy. Highlights: Demonstrate existence of duration misperception in a real-world environment  Develop a 2-stage forecasting model combining survival analysis & conditional logit  Employ survival analysis to study pricing efficiency in a speculative market  Evaluate the economic costs of duration misperception in a financial market

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“…Indeed, numerous field studies on horse race betting, beginning with Griffith (1949), have attempted to evaluate the extent to which betting markets are efficient (see Vaughan Williams, 2005, chap. 2 and 3 for extensive reviews). The evidence suggests that insiders can earn above-average returns, and thus the market may be considered informationally inefficient (see, for example, Schnytzer and Shilony, 1995).…”

Section: Introductionmentioning

confidence: 99%