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Testing Market Efficiency in a Fixed Odds Betting Market

Author

Listed:
  • Jakobsson, Robin

    (Department of Business, Economics, Statistics and Informatics)

  • Karlsson, Niklas

    (Department of Business, Economics, Statistics and Informatics)

Abstract

This paper tests the hypothesis of market efficiency for the fixed odds betting market of Swedish trotting head-to-head matches. The hypothesis is carried out by a Wald test within a logistic regression model. Data support rejection of semi-strong efficiency at the 5 percent level of significance, while the weak form efficiency cannot be rejected. Moreover, evaluation of the simple strategy to bet on those horses where, conditional on the estimated model, the expected profit is positive results in a profit of 7.8 percent per bet.

Suggested Citation

  • Jakobsson, Robin & Karlsson, Niklas, 2007. "Testing Market Efficiency in a Fixed Odds Betting Market," Working Papers 2007:12, Örebro University, School of Business.
    • Handle: RePEc:hhs:oruesi:2007_012
    as

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    References listed on IDEAS

    as
    1. Figlewski, Stephen, 1979. "Subjective Information and Market Efficiency in a Betting Market," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 75-88, February.
    2. Donald B. Hausch & William T. Ziemba, 1985. "Transactions Costs, Extent of Inefficiencies, Entries and Multiple Wagers in a Racetrack Betting Model," Management Science, INFORMS, vol. 31(4), pages 381-394, April.
    3. Ioannis Asimakopoulos & John Goddard, 2004. "Forecasting football results and the efficiency of fixed-odds betting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(1), pages 51-66.
    4. Gabriel, Paul E & Marsden, James R, 1990. "An Examination of Market Efficiency in British Racetrack Betting," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 874-885, August.
    5. Asch, Peter & Malkiel, Burton G & Quandt, Richard E, 1986. "Market Efficiency in Racetrack Betting: Further Evidence and a Correction," The Journal of Business, University of Chicago Press, vol. 59(1), pages 157-160, January.
    6. Ali, Mukhtar M, 1977. "Probability and Utility Estimates for Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 803-815, August.
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    8. Snyder, Wayne W, 1978. "Horse Racing: Testing the Efficient Markets Model," Journal of Finance, American Finance Association, vol. 33(4), pages 1109-1118, September.
    9. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    10. repec:bla:jfinan:v:43:y:1988:i:4:p:995-1008 is not listed on IDEAS
    11. Tim Kuypers, 2000. "Information and efficiency: an empirical study of a fixed odds betting market," Applied Economics, Taylor & Francis Journals, vol. 32(11), pages 1353-1363.
    12. Asch, Peter & Malkiel, Burton G & Quandt, Richard E, 1984. "Market Efficiency in Racetrack Betting," The Journal of Business, University of Chicago Press, vol. 57(2), pages 165-175, April.
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    Cited by:

    1. V'elez Jim'enez & Rom'an Alberto & Lecuanda Ontiveros & Jos'e Manuel & Edgar Possani, 2023. "Sports Betting: an application of neural networks and modern portfolio theory to the English Premier League," Papers 2307.13807, arXiv.org.

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    More about this item

    Keywords

    EMH; betting; trotting; market; efficiency; logit; Wald;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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