The Favourite‐Longshot Bias, Bookmaker Margins and Insider Trading in a Variety of Betting Markets

Michael Cain, David Law and David Peel

Bulletin of Economic Research, 2003, vol. 55, issue 3, 263-273

Abstract: This paper verifies the existence of the favourite‐longshot bias in a variety of sports betting markets where odds are set by bookmakers, but the precise pattern of the bias is not identical. Evidence is found to support a central prediction of the Shin (1993) model, which asserts that bookmakers are impelled to create a bias in their odds because of the presence of insider traders: that margins increase with the number of competitors.

Date: 2003
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