Abstract
A widely documented empirical regularity in gambling markets is that bets on high probability events (a race won by a “favourite”) have higher expected returns than bets on low probability events (a “longshot” wins). Such favourite-longshot (FL) biases however appear to be more severe and persistent in bookmaker markets than in pari-mutuel markets; the latter sometimes exhibit no bias or a reverse FL bias. Our results help understand these differences: the odds grid in bookmaker markets leads to a built-in FL bias, whereas that used in pari-mutuel betting pushes these markets toward a reverse FL bias.
Original language | English |
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Article number | 3 |
Pages (from-to) | 29-50 |
Number of pages | 22 |
Journal | The Journal of Prediction Markets |
Volume | 2 |
Issue number | 2 |
Publication status | Published - Sept 2008 |
Keywords
- GAMBLING
- FAVOURITE-LONGSHOT BIAS
- Tick-Size
- Bookmaker Betting
- Pari-Mutuel Betting