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Home Bias and Prediction Markets: Evidence from the Racetrack

Author

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  • Paul Scanlon

    (Department of Economics, Trinity College Dublin, Ireland)

Abstract

Significant horse races taking place in Britain and France frequently involve participants from both countries. The existence of distinct and segmented wagering markets in each country facilitates the study of potentially different market behaviors. Using over eight hundred observations from these markets, I show the existence of a pronounced home bias, with participants in domestic markets favoring horses trained domestically. The bias is large, statistically significant, and becomes more pronounced as betting odds rise. Restricting the analysis to foreign trained horses that have already performed well in domestic races, I find the bias virtually disappears suggesting a role for learning and informational asymmetries.

Suggested Citation

  • Paul Scanlon, 2011. "Home Bias and Prediction Markets: Evidence from the Racetrack," Trinity Economics Papers tep2211, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep2211
    as

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    File URL: http://www.tcd.ie/Economics/TEP/2011/TEP2211.pdf
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    References listed on IDEAS

    as
    1. Joshua D. Coval & Tobias J. Moskowitz, 1999. "Home Bias at Home: Local Equity Preference in Domestic Portfolios," Journal of Finance, American Finance Association, vol. 54(6), pages 2045-2073, December.
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    More about this item

    Keywords

    Home bias; Prediction Markets; Market efficiency;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • F3 - International Economics - - International Finance

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