Introduction to Prices vs. Handicapping: Place and Show Anomalies

Donald B. Hausch, Victor S. Y. Lo and William T. Ziemba
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Donald B. Hausch: University of Wisconsin-Madison, USA
Victor S. Y. Lo: University of British Columbia, Canada
William T. Ziemba: University of British Columbia, Canada

Chapter 35 in Efficiency of Racetrack Betting Markets, 2008, pp 355-356 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractMost of the research on racetrack efficiency has focused on the win bet market, and the general conclusion has been that there exists a favorite-longshot bias but it is not sufficiently strong to allow positive profits (e.g. Snyder (1978)1). Extreme favorites of odds 3-10 and shorter are an exception, allowing a small positive return, but they are so uncommon that for practical purposes the win market is weak form efficient, see Ziemba and Hausch (1986)2. Inefficiencies in the place and show markets, however, have been reported as early as Griffith (1961)1. There are several explanations: 1) their pools are smaller; 2) place and show wagers are more complicated than win bets since many different payoffs are possible depending on which horses are the first two or three finishers; and 3) extrapolating the win market's bias for favorites to higher probability place and show bets on favorites suggests a potential for inefficiencies…

Keywords: Racetrack Efficiency; Racetrack Betting Market; Racetrack Betting; Win Market; Finance (search for similar items in EconPapers)
Date: 2008
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