Home Bias and Prediction Markets: Evidence from the Racetrack

Paul Scanlon ()
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Paul Scanlon: Department of Economics, Trinity College Dublin, Ireland

Economic Papers from Trinity College Dublin, Economics Department

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.

Keywords: Home bias; Prediction Markets; Market efficiency (search for similar items in EconPapers)
JEL-codes: F3 G0 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2011-12
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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep2211

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