Broken odds and the favourite-longshot bias in parimutuel betting: a direct test

W. Walls and Kelly Busche

Applied Economics Letters, 2003, vol. 10, issue 5, 311-314

Abstract: This research examines empirically the effect using broken odds - the rounded off odds reported by horse track operators - on statistical tests of market efficiency in parimutuel gambling. It finds that using rounded-off odds to test for market efficiency, instead of using the exact values, introduces a downward bias in the test statistics for favourite horses. Previous studies, because they relied on the rounded-off odds data, may have overstated the extent of the favourite-longshot bias in parimutuel wagering markets.

Date: 2003
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DOI: 10.1080/13504850210147162

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