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Market efficiency in Scandinavian racetrack betting

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  • Gjerde, Øystein

Abstract

This study analyzes Scandinavian racetrack betting markets. We discuss market efficiency and investor behavior in light of the fact that investors earn negative returns on average. Show bets on favorites in Norway yield a small positive return, while all the other betting markets are weak form efficient. We establish the favorite-longshot bias for quinella and exactor bettors, but not for win bettors. Our results can be explained by small pools and high track takes. Investors wagering at the racetrack have a different risk attitude than investors wagering off the track. We explain how our results should influence the design of betting products, especially with respect to the fraction of the pool returned to winners.

Suggested Citation

  • Gjerde, Øystein, 1994. "Market efficiency in Scandinavian racetrack betting," Scandinavian Journal of Management, Elsevier, vol. 10(4), pages 409-420, December.
    • Handle: RePEc:eee:scaman:v:10:y:1994:i:4:p:409-420
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