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%T Do horses like vodka and sponging? On market manipulation and the favourite-longshot bias
%A Winter, Stefan
%A Kukuk, Martin
%J Applied Economics
%N 1
%P 75-87
%V 40
%D 2008
%K Pferdesport; Bias
%= 2011-04-26T11:17:00Z
%~ http://www.peerproject.eu/
%> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-242831
%X 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.
%C USA
%G en
%9 journal article
%W GESIS - http://www.gesis.org
%~ SSOAR - http://www.ssoar.info