The efficiency of exotic wagers in racetrack betting

Marshall Gramm, C. Nicholas McKinney and Douglas Owens

Applied Economics, 2008, vol. 40, issue 1, 89-97

Abstract: Many empirical studies have found the existence of a bias where the general public overestimates low probability events. This phenomenon has been termed the favourite-longshot bias and has been much studied in betting markets. This article looks at efficiency in multihorse 'exotic' wagers using 11 194 races run at 35 U.S. racetracks. We find the standard favourite-longshot in exacta wagers (involves picking the first two finishers in order). Results are unclear for trifecta wagers (picking the first three finishers in order).

Date: 2008
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DOI: 10.1080/00036840701466085

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