Risk Love and the Favorite-Longshot Bias: Evidence from German Harness Horse Racing

Stefan Winter and Martin Kukuk

Schmalenbach Business Review (sbr), 2006, vol. 58, issue 4, 349-364

Abstract: Empirical studies of horse race betting in the U.S., the UK, and Australia have established the so called favorite-longshot bias. Studies find that on average, bets on longshots lose much more than do bets on favorites. This means that longshots are overbet and favorites are underbet. By using a large data set of pari-mutuel harness horse races, we show that the favorite-longshot bias exists in Germany as well. We provide evidence that there is bias not only for simple win bets, but also for other types of bets as well, and that the bias is a time- and track-invariant phenomenon. The bias is consistent with the assumption of the (local) love of risk of the betting audience.

Keywords: Betting; Favorite-Longshot-Bias; Horse Race; Market Equilibrium; Risk (search for similar items in EconPapers)
JEL-codes: D58 D81 L83 (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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