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The effect of late money on betting market efficiency

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  • Marshall Gramm
  • C. Nicholas McKinney

Abstract

This article is an analysis of the price movements in a speculative market at closing. Specifically, we look at 1644 US horse races and analyse the change in betting pool totals and their suggested probabilities to confirm that late wagers on average come from more informed bettors. Almost 40% of all wagering dollars enter betting pools in the last minute of wagering. This 'late' money is found to increase efficiency and itself is the best prediction of the true win, place and show probability of a horse. A clustered tobit regression shows that late increases in the betting share on a specific horse increase net returns.

Suggested Citation

  • Marshall Gramm & C. Nicholas McKinney, 2009. "The effect of late money on betting market efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 369-372.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:4:p:369-372
    DOI: 10.1080/13504850601018577
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    Cited by:

    1. Kurihara Kazutaka & Yohei Tutiya, 2018. "Efficiency in Micro-Behaviors and FL Bias," Papers 1805.04225, arXiv.org.
    2. Suhonen, Niko & Saastamoinen, Jani & Kainulainen, Tuomo & Forrest, David, 2018. "Is timing everything in horse betting? Bet amount, timing and bettors’ returns in pari-mutuel wagering markets," Economics Letters, Elsevier, vol. 173(C), pages 97-99.

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