RACETRACK BETTING–AN EXAMPLE OF A MARKET WITH EFFICIENT ARBITRAGE

Jay Ritter

Chapter 42 in Efficiency of Racetrack Betting Markets, 2008, pp 431-441 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractA model of racetrack betting behavior is set forward, and its implications tested, albeit with a small sample size. The model is consistent with risk-loving on the part of bettors. A simple betting rule [essentially a crude version of the Dr. Z system, describd by Ziemba and Hausch (1984)] is then tested, with evidence put forward that an unexploited profit opportunity may exist. When uncertainty is introduced, however, it is found that the profits vanish, a result consistent with the joint hypothesis of market efficiency and the model of betting behavior described in the paper.

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