Exploring Decision Makers' Use of Price Information in a Speculative Market

Johnnie E. V. Johnson (), Owen Jones () and Leilei Tang ()
Additional contact information
Johnnie E. V. Johnson: Center for Risk Research, School of Management, University of Southampton, Highfield, Southampton SO17 1BJ, United Kingdom
Owen Jones: Department of Mathematics and Statistics, University of Melbourne, Parkville, Melbourne, Victoria 3010, Australia
Leilei Tang: Center for Risk Research, School of Management, University of Southampton, Highfield, Southampton SO17 1BJ, United Kingdom

Management Science, 2006, vol. 52, issue 6, 897-908

Abstract: We explore the extent to which the decisions of participants in a speculative market effectively account for information contained in prices and price movements. The horse race betting market is an ideal environment to explore these issues. A conditional logit model is constructed to determine winning probabilities based on bookmakers' closing prices and the time-indexed movement of prices to the market close. We incorporate a technique for extracting predictors from price (odds) curves using orthogonal polynomials. The results indicate that closing prices do not fully incorporate market price information, particularly information that is less readily discernable by market participants.

Keywords: market efficiency; information; modeling price curves; betting; wagering (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1060.0506 (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:52:y:2006:i:6:p:897-908

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().