| By: |
Alexander K. Koch (Department of Economics, Royal Holloway, University of London);
Hui-Fai Shing (Department of Economics, Royal Holloway, University of London) |
| Abstract: |
A widely documented empirical regularity in gambling markets is that bets on
high probability events (a race won by a ``favourite'') have higer expected
returns than bets on low probability events (a ``longshot'' win). Such
favourite-longshot (FL) biases however appear to be more severe and persistent
in bookmaker markets than in pari-mutuel markets; the latter sometims exhibit
no bias or a revers FL bias. Our results help understand these differences:
the odds grid in bookmaker markets leads to a built-in FL bias, wheras that
used in pari-mutuel betting pushes these markets toward a reverse FL bias. |
| Keywords: |
Gambling; Favourite-Lonshot Bias; Bookmaker betting; Parimutuel Betting; Breakage, Tick Size. |
| JEL: |
G13 L13 L83 |
| Date: |
2007–11 |
| URL: |
http://d.repec.org/n?u=RePEc:hol:holodi:0704&r=spo |