Introduction to Psychological Studies

Donald B. Hausch, Victor S. Y. Lo and William T. Ziemba
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Donald B. Hausch: University of Wisconsin-Madison, USA
Victor S. Y. Lo: University of British Columbia, Canada
William T. Ziemba: University of British Columbia, Canada

Chapter 2 in Efficiency of Racetrack Betting Markets, 2008, pp 7-8 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractJust as the racetrack market has many features that make it an interesting setting in which to study market efficiency, it likewise provides an excellent forum for a psychological investigation of investor risk behavior. As Metzger (1985)1 notes, the racetrack offers at least four advantages over laboratory studies: 1) data is plentiful and there is considerable variation in locale, track size, race characteristics, etc.; 2) the level of dollars wagered are of economic significance to most bettors; 3) a vast amount of information is available to bettors from a variety of sources; and 4) there are several betting possibilities — straight and exotic wagering — in each race. A downside of the racetrack forum is that the odds aggregate bettors' decisions, and so individual actions are usually indiscernable; however, numerous aggregate effects have been documented that a psychological perspective provides some insights to. Foremost among these is the strong and stable favorite-longshot bias in the win market, first documented by psychologists Griffith (1949)1 and McGlothlin (1956)1…

Keywords: Racetrack Efficiency; Racetrack Betting Market; Racetrack Betting; Win Market; Finance (search for similar items in EconPapers)
Date: 2008
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