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Introduction to Psychological Studies

In: Efficiency Of Racetrack Betting Markets

Author

Listed:
  • Donald B. Hausch

    (University of Wisconsin-Madison, USA)

  • Victor S. Y. Lo

    (University of British Columbia, Canada)

  • William T. Ziemba

    (University of British Columbia, Canada)

Abstract

Just as the racetrack market has many features that make it an interesting setting in which to study market efficiency, it likewise provides an excellent forum for a psychological investigation of investor risk behavior. As Metzger (1985)1 notes, the racetrack offers at least four advantages over laboratory studies: 1) data is plentiful and there is considerable variation in locale, track size, race characteristics, etc.; 2) the level of dollars wagered are of economic significance to most bettors; 3) a vast amount of information is available to bettors from a variety of sources; and 4) there are several betting possibilities — straight and exotic wagering — in each race. A downside of the racetrack forum is that the odds aggregate bettors' decisions, and so individual actions are usually indiscernable; however, numerous aggregate effects have been documented that a psychological perspective provides some insights to. Foremost among these is the strong and stable favorite-longshot bias in the win market, first documented by psychologists Griffith (1949)1 and McGlothlin (1956)1…

Suggested Citation

  • Donald B. Hausch & Victor S. Y. Lo & William T. Ziemba, 2008. "Introduction to Psychological Studies," World Scientific Book Chapters, in: Donald B Hausch & Victor SY Lo & William T Ziemba (ed.), Efficiency Of Racetrack Betting Markets, chapter 2, pages 7-8, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812819192_0002
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    Cited by:

    1. Grégoire Croidieu & Charles-Clemens Ruling & Bilal-Ahmed Jathol, 2017. "Complex field-positions and non-imitation: Pioneers, strangers, and insulars in Australian fine-wine," Grenoble Ecole de Management (Post-Print) hal-01609429, HAL.

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