Bookmaker and Pari-Mutuel Betting: Is a (Reverse) Favourite-Longshot Bias Built-In?

Alexander Karl Koch () and Hui-Fai Shing

Journal of Prediction Markets, 2008, vol. 2, issue 2, pages 29-50

Abstract: A widely documented empirical regularity in gambling markets is that bets on high probability events (a race won by a “favourite”) have higher expected returns than bets on low probability events (a “longshot” wins). Such favourite-longshot (FL) biases however appear to be more severe and persistent in bookmaker markets than in pari-mutuel markets; the latter sometimes exhibit no bias or a reverse FL bias. Our results help understand these differences: the odds grid in bookmaker markets leads to a built-in FL bias, whereas that used in pari-mutuel betting pushes these markets toward a reverse FL bias.

Keywords: GAMBLING; FAVOURITE-LONGSHOT BIAS; BOOKMAKER BETTING; PARIMUTUEL BETTING; BREAKAGE; TICK SIZE (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2008

Downloads: (external link)
http://www.ingentaconnect.com/content/ubpl/jpm/2008/00000002/00000002/art00003 (text/html)

Related works:
Working Paper: Bookmaker and pari-mutuel betting: Is a (reverse) favourite-longshot bias built-in? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:buc:jpredm:v:2:y:2008:i:2:p:29-50

Ordering information: This journal article can be ordered from
http://www.predictio ... ex_files/Page418.htm

Access Statistics for this article

Journal of Prediction Markets is edited by Nottingham Business School Leighton Vaughan Williams

More articles in Journal of Prediction Markets from University of Buckingham Press
Series data maintained by Victor Matheson, College of the Holy Cross ().