IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v47y2002i01ns021759080200033x.html
   My bibliography  Save this article

Professional Bettors, Odds-Arbitrage Competition, And Betting Market Equilibrium

Author

Listed:
  • BRIAN R. ADAMS

    (Advanced Digital Information Corporation, Redmond, WA, USA)

  • FRANK W. RUSCO

    (U.S. General Accounting Office, Washington, D.C., USA)

  • W. DAVID WALLS

    (Department of Economics, University of Calgary, Canada)

Abstract

A slew of empirical evidence on horse racetrack betting markets points to betting biases and market inefficiency. More recent empirical work has documented the absence of betting biases in racetrack betting markets characterized by a high volume of betting. This paper offers a competition-based model of betting behavior that is consistent with the pattern of betting biases reported in the literature. We postulate the existence of professional bettors who, being better informed and/or having different objectives than the general betting population, engage in odds arbitrage when doing so is profitable. We evaluate the case of a single odds-arbitraging bettor first in order to establish the fundamental properties of odds arbitrage. We then examine the effects of entry of professional bettors who play a Nash game in odds arbitrage; the results show that professionals' participation causes the final track odds to converge to the level implied by the horses' true win probabilities when there is a high volume of betting.

Suggested Citation

  • Brian R. Adams & Frank W. Rusco & W. David Walls, 2002. "Professional Bettors, Odds-Arbitrage Competition, And Betting Market Equilibrium," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 47(01), pages 111-127.
    • Handle: RePEc:wsi:serxxx:v:47:y:2002:i:01:n:s021759080200033x
    DOI: 10.1142/S021759080200033X
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S021759080200033X
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S021759080200033X?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jansen, Ivo Ph. & Nikiforov, Andrei L., 2022. "Intertemporal variation in abnormal volume around earnings announcements: “Distraction” or “flocking-and-dispersing”?," Economics Letters, Elsevier, vol. 218(C).
    2. M. Sung & J. E. V. Johnson, 2010. "Revealing Weak‐Form Inefficiency in a Market for State Contingent Claims: The Importance of Market Ecology, Modelling Procedures and Investment Strategies," Economica, London School of Economics and Political Science, vol. 77(305), pages 128-147, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:47:y:2002:i:01:n:s021759080200033x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.