Power, Not Fear: A Collusion-Based Account of Betting Market Inefficiency

Alistair Bruce and David Marginson

International Journal of the Economics of Business, 2014, vol. 21, issue 1, 77-97

Abstract: We examine racetrack betting market inefficiency. We argue that the overround -- an established measure of inefficiency -- may be seen as a reflection of bookmakers' collusive returns maximising behaviour, rather than simply as their response to an adverse selection problem. We test, and find empirical support for, several proposed market effects of bookmaker (market maker) collusion. Besides number of race participants, overround varies significantly according to (1) whether or not the race is the last at the race meeting, (2) racetrack location, (3) day of the week (weekday vs. weekend), (4) type of race (handicap vs. non-handicap), and (5) type of race event (Flat/National Hunt). The study provides fresh insight into the origins of betting market inefficiency, where the link between market structure and context and bookmaker behaviour is a key feature. Regarding the broader implications, the study alerts us to the potential for financial market inefficiencies such as the bid-ask spread to be explained, in part, as a consequence of market makers' opportunistic behaviour wherever and whenever it is possible for intermediaries to exploit their understanding of investor behaviour .

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13571516.2013.782982 (text/html)
Access to full text is restricted to subscribers.

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:taf:ijecbs:v:21:y:2014:i:1:p:77-97

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIJB20

DOI: 10.1080/13571516.2013.782982

Access Statistics for this article

International Journal of the Economics of Business is currently edited by Eleanor Morgan

More articles in International Journal of the Economics of Business from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().