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Do horses like vodka and sponging? On market manipulation and the favourite-longshot bias
[journal article]
Winter, Stefan; Kukuk, Martin
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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-242831
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| Abstract | One of the most striking empirical patterns of horse race betting markets is the favorite-longshot bias: Bets on favorites have dramatically higher expected returns than bets on longshots. The literature offers a couple of different, though not mutually exclusive, explanations based on risk preferences and probability perceptions. This article adds a new possible explanation: The favorite-longshot bias may be the rational answer of an honest audience to a simple, but highly lucrative cheating opportunity of insiders. We provide anecdotal evidence that the type of cheating we model here really takes place. What is more, by employing a large scale German data set we are able to demonstrate that the pattern of the favourite-longshot bias changes as the opportunity of cheating vanishes. The changes we observe are in accord with the cheating model we suggest. |
| Classification | Economic Statistics, Econometrics, Business Informatics |
| Free Keywords | Pferdesport; Glücksspiel; Bias; Schätzung |
| Document language | English |
| Publication Year | 2008 |
| Page/Pages | p. 75-87 |
| Journal | Applied Economics, 40 (2008) 1 |
| DOI | http://dx.doi.org/10.1080/00036840701731538 |
| Status | Postprint; reviewed |
| Licence | PEER Licence Agreement (applicable only to documents from PEER project) |
| Document Type | journal article |
