Efficiency and arbitrage across parimutuel wagering pools

Marshall Gramm, C. Nicholas McKinney and Douglas H. Owens

Applied Economics, 2012, vol. 44, issue 14, 1813-1822

Abstract: Previous studies have found some degree of inefficiency in betting markets. However, it is difficult to implement a strategy to take advantage of these biases. This article investigates and attempts to arbitrage interrelated betting markets by undertaking three betting simulations using two datasets comprised of parimutuel pools from US horse races. Two of the betting simulations are positive returns, but in the most realistic real-time simulation the losses are substantial. Profitable betting opportunities disappear due to last minute wagers which change the odds and increase market efficiency.

Date: 2012
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DOI: 10.1080/00036846.2011.554378

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