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Introduction to the Efficiency of Win Markets and the Favorite-Longshot Bias

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

Economists have long shown interest in racetrack betting as a source for investigating attitudes to risk and the efficiency of markets. Thaler and Ziemba (1988)1, surveying research in both racing and lotteries, point that racetrack betting is an interesting application of efficient markets and rational expectations hypotheses since it possesses the usual characteristics of financial markets; namely, large numbers of investors/bettors with access to rich information sets. An advantage for testing financial theories that the racetrack has over most financial markets, though, is that there is a well-defined termination point at which final payoffs are determined…

Suggested Citation

  • Donald B. Hausch & Victor S. Y. Lo & William T. Ziemba, 2008. "Introduction to the Efficiency of Win Markets and the Favorite-Longshot Bias," World Scientific Book Chapters, in: Donald B Hausch & Victor SY Lo & William T Ziemba (ed.), Efficiency Of Racetrack Betting Markets, chapter 25, pages 251-253, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812819192_0025
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