Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market

Gandar, John M.; Zuber, Richard A.; Johnson, R. Stafford

doi:10.1080/00036840010012951

Cited by 31 publications

(16 citation statements)

References 16 publications

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“…Expected returns from level stake betting at each odds level confirm that, as in previous studies (e.g. Gander et al 2001;Snowberg and Wolfers 2005), abnormal returns are not achievable (to level stake betting) by restricting bets to horses whose odds are less than a given value (see Figures 1 and 2), despite the existence of the FLB. In addition, other simple means of accounting for the bias, such as betting only on favourites or betting enough on each horse to return d1 (hence restricting the size of bets on longshots), improve the expected return over a simple strategy of betting level stakes on each horse (see Table 2).…”

Section: Market Ecology As a Source Of Abnormal Returnssupporting

confidence: 86%

Revealing Weak‐Form Inefficiency in a Market for State Contingent Claims: The Importance of Market Ecology, Modelling Procedures and Investment Strategies

Sung

Johnson

2009

Economica

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This paper examines the degree to which current prices discount historical prices in a market for state contingent claims. Conditional logit analysis is employed to predict winning probabilities, based on market prices in a betting market. These are used, together with various wagering strategies to yield substantial abnormal returns. Consequently, in contrast to the existing literature, the results suggest that the market is not weak form efficient. The disparity with previous efficiency studies highlights the importance of considering market ecology and of adopting an appropriate modelling procedure and investment strategy to fully exploit information contained in market prices. Copyright (c) The London School of Economics and Political Science 2008.

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Section: Market Ecology As a Source Of Abnormal Returnssupporting

confidence: 86%

Revealing Weak‐Form Inefficiency in a Market for State Contingent Claims: The Importance of Market Ecology, Modelling Procedures and Investment Strategies

Sung

Johnson

2009

Economica

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“…The most researched anomaly, however, is the favorite‐long shot bias, an irregularity in which the underbetting of favorites produces consistently greater returns as compared to long shots. Numerous studies have examined a wide range of pari‐mutuel betting markets to show that the favorite‐long shot bias exists (Ali 1977; Asch, Malkiel, and Quandt 1982), does not exist (Gandar, Zuber, and Johnson 2001), and exists in reverse form, where long shots are underbet and thusprovide a greater expected return (Busche and Hall 1988; Swindler and Shaw 1995).…”

Section: Gamblers' Preferencesmentioning

confidence: 99%

What Do Bettors Want? Determinants of Pari‐Mutuel Betting Preference

Gramm

McKinney

Owens

et al. 2007

American J Econ Sociol

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This paper is an analysis of the demand for thoroughbred racetrack wagers, examining evidence that would support the existence of two types of bettors: the risk-averse informed bettor versus the uninformed bettor. Looking at 12 major racetracks over the fall of 2002, we undertake an empirical examination of the determinants of bettors' preferences for particular wagers on specific races. The goal is to try to determine what individual aspects of a race (conditions, surface, participants, etc.) will encourage increased wagering dollars. With the advent of simulcasting, the competition for the wagering dollar is fierce, as the bettor can choose from more than 100 races daily, each race offering numerous betting options. We find for most wagers that higher quality participants, larger and more competitive fields, and turf races increase betting volume while higher pari-mutuel takeout, poor track conditions, and other races run concurrently reduce volume. However, more competitive fields reduce betting volume in the show and trifecta pools. Optimal field size is determined to be between 10 and 12 betting interests. Overall, we find support for the existence of a significant share of risk-averse informed bettors.

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“…This anomaly, called the favourite-longshot bias, describes the tendency for gamblers to over-estimate the likelihood of longshots winning and under-estimate favourites (Ali, 1977;Thaler & Ziemba, 1988). There is an extensive literature on favourite-longshot bias, with most research finding that longshots have greater long-run losses than favourites (Ali, 1977;Bird & McCrae, 1987;Gandar, Zuber, & Johnson, 2001;Griffith, 1949;Hausch, Ziemba, & Rubinstein, 1981;Winter & Kukuk, 2006;Vaughan Williams, 1999) . More recently (Vaughan Williams, Sung, Fraser-Mackenzie, Peirson, & Johnson, 2016) found evidence of the favourite-longshot bias in poker players.…”

Section: Introductionmentioning

confidence: 99%

Why do some soccer bettors lose more money than others?

Buhagiar

Cortis

Newall

2018

Journal of Behavioral and Experimental Finance

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Why do some soccer bettors lose more money than others? In an efficient prediction market, each gambler should break-even before costs (but losing a constant amount after costs, reflecting the bookmaker's margin). Previous empirical studies across numerous sports betting markets show that bets on longshots tend to lose more than bets on favourites (favourite-longshot bias). We use 163,992 soccer odds from ten European leagues to test plausible hypotheses around why some soccer bettors lose more money than others. Are soccer bettors with above average losses simply biased, or are their losses driven by betting on events that are inherently unpredictable? We confirm the existence of favourite-longshot bias in soccer in this sample, but find another surprising feature of betting on longshots. As measured by the Brier score, bookmakers' odds were better predictors of longshots than favourites, suggesting another potential channel whereby bettors' preference for betting on longshots may cost them dearly.^ <100 Observations, ^^ <50 observations, ^^^ <10 observations Profit/Loss columns show the percentage profit/loss made if a unit bet is placed on odds recorded within this range. Expected Profit/Loss columns are derived from the bookmaker margin.

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Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market

Cited by 31 publications

References 16 publications

Revealing Weak‐Form Inefficiency in a Market for State Contingent Claims: The Importance of Market Ecology, Modelling Procedures and Investment Strategies

Revealing Weak‐Form Inefficiency in a Market for State Contingent Claims: The Importance of Market Ecology, Modelling Procedures and Investment Strategies

What Do Bettors Want? Determinants of Pari‐Mutuel Betting Preference

Why do some soccer bettors lose more money than others?

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