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Game, set and match: the favourite-long shot bias in tennis betting exchanges

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  • Isabel Abinzano
  • Luis Muga
  • Rafael Santamaria

Abstract

We test for the existence of Favourite-Longshot Bias (FLB) in tennis betting exchanges. Despite these being order-driven markets, with no direct participation from bookmakers, we have found very similar results to those obtained by Lahvička (2014) for bookmakers’ betting markets: the bias is stronger in matches between lower-ranked players, in later round matches and in high profile tournaments. This suggests that bookmakers’ adjustments to respond to informed betting are not the main driver of FLB. The varying magnitude of the bias across different types of event in the main market also weakens arguments linking FLB to gamblers’ risk preferences, and suggests the need to consider the microstructure features of the market together with the cognitive biases highlighted in the behavioural finance literature.

Suggested Citation

  • Isabel Abinzano & Luis Muga & Rafael Santamaria, 2016. "Game, set and match: the favourite-long shot bias in tennis betting exchanges," Applied Economics Letters, Taylor & Francis Journals, vol. 23(8), pages 605-608, May.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:8:p:605-608
    DOI: 10.1080/13504851.2015.1093074
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    Cited by:

    1. Raphael Flepp & Oliver Merz & Egon Franck, 2024. "When the league table lies: Does outcome bias lead to informationally inefficient markets?," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 414-429, January.
    2. Vincenzo Candila & Antonio Scognamillo, 2019. "On the Longshot Bias in Tennis Betting Markets: The Casco Normalization," Working Papers 3_236, Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno.
    3. Isabel Abinzano & Luis Muga & Rafael Santamaria, 2019. "Hidden Power of Trading Activity: The FLB in Tennis Betting Exchanges," Journal of Sports Economics, , vol. 20(2), pages 261-285, February.
    4. He, Xue-Zhong & Treich, Nicolas, 2017. "Prediction market prices under risk aversion and heterogeneous beliefs," Journal of Mathematical Economics, Elsevier, vol. 70(C), pages 105-114.
    5. Ramirez, Philip & Reade, J. James & Singleton, Carl, 2023. "Betting on a buzz: Mispricing and inefficiency in online sportsbooks," International Journal of Forecasting, Elsevier, vol. 39(3), pages 1413-1423.
    6. Ruud H. Koning & Renske Zijm, 2023. "Betting market efficiency and prediction in binary choice models," Annals of Operations Research, Springer, vol. 325(1), pages 135-148, June.
    7. Brown, Alasdair & Yang, Fuyu, 2019. "The wisdom of large and small crowds: Evidence from repeated natural experiments in sports betting," International Journal of Forecasting, Elsevier, vol. 35(1), pages 288-296.

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