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The ordinal efficiency of betting markets: an exploded logit approach

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  • Johnnie Johnson
  • Alistair Bruce
  • Jiejun Yu

Abstract

This article offers a new perspective on efficiency in betting markets by examining the degree to which finishing order in horse races corresponds to probabilities inherent in odds across different categories of horse race. The application of an exploded logit procedure reveals a significantly greater degree of ordinal efficiency in higher relative to lower-class races. Explanations for the phenomenon include differences in prize-related incentives, cross-market distinctions in information markets and differential opportunity/incentive for market manipulation.

Suggested Citation

  • Johnnie Johnson & Alistair Bruce & Jiejun Yu, 2010. "The ordinal efficiency of betting markets: an exploded logit approach," Applied Economics, Taylor & Francis Journals, vol. 42(29), pages 3703-3709.
  • Handle: RePEc:taf:applec:v:42:y:2010:i:29:p:3703-3709
    DOI: 10.1080/00036840802314622
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    References listed on IDEAS

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    6. William Dare & A. Steven Holland, 2004. "Efficiency in the NFL betting market: modifying and consolidating research methods," Applied Economics, Taylor & Francis Journals, vol. 36(1), pages 9-15.
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    9. repec:bla:econom:v:43:y:1976:i:17:p:139-50 is not listed on IDEAS
    10. John Gandar & Richard Zuber & R. Stafford Johnson, 2001. "Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1621-1629.
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    Cited by:

    1. Green, Lawrence & Sung, Ming-Chien & Ma, Tiejun & Johnson, Johnnie E. V., 2019. "To what extent can new web-based technology improve forecasts? Assessing the economic value of information derived from Virtual Globes and its rate of diffusion in a financial market," European Journal of Operational Research, Elsevier, vol. 278(1), pages 226-239.
    2. Alasdair Brown, 2012. "Examining Agency Conflict in Horse Racing," Southern Economic Journal, John Wiley & Sons, vol. 79(2), pages 388-398, October.

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