Download full text
(561.3Kb)
Citation Suggestion
Please use the following Persistent Identifier (PID) to cite this document:
https://nbn-resolving.org/urn:nbn:de:0168-ssoar-242831
Exports for your reference manager
Do horses like vodka and sponging? On market manipulation and the favourite-longshot bias
[journal article]
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 preferen... view more
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.... view less
Keywords
gambling; estimation
Classification
Economic Statistics, Econometrics, Business Informatics
Free Keywords
Pferdesport; Bias
Document language
English
Publication Year
2008
Page/Pages
p. 75-87
Journal
Applied Economics, 40 (2008) 1
DOI
https://doi.org/10.1080/00036840701731538
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)