EconPapers    
Economics at your fingertips  
 

The behaviour of betting and currency markets on the night of the EU referendum

Tom Auld () and Oliver Linton ()

No 10/18, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: We study the behaviour of the Betfair betting market and the sterling/dollar exchange rate (futures price) during 24 June 2016, the night of the EU referendum. We investigate how the two markets responded to the announcement of the voting results. We employ a Bayesian updating methodology to update prior opinion about the likelihood of the final outcome of the vote. We then relate the voting model to the real time evolution of the market determined prices as results are announced. We find that although both markets appear to be inefficient in absorbing the new information contained in vote outcomes, the betting market is apparently less inefficient than the FX market. The different rates of convergence to fundamental value between the two markets leads to highly profitable arbitrage opportunities.

Keywords: EU referendum; prediction markets; machine learning; efficient markets hypothesis; pairs trading; cointegration; Bayesian methods; exchange rates. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-big, nep-cmp, nep-mst and nep-pay
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.monash.edu/business/ebs/research/publications/ebs/wp10-2018.pdf (application/pdf)

Related works:
Journal Article: The behaviour of betting and currency markets on the night of the EU referendum (2019) Downloads
Working Paper: The behaviour of betting and currency markets on the night of the EU referendum (2018) Downloads
Working Paper: The Behaviour of Betting and Currency Markets on the Night of the EU Referendum (2017) Downloads
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:msh:ebswps:2018-10

Ordering information: This working paper can be ordered from
http://business.mona ... -business-statistics

Access Statistics for this paper

More papers in Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics PO Box 11E, Monash University, Victoria 3800, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Dr Xibin Zhang ().

 
Page updated 2019-04-14
Handle: RePEc:msh:ebswps:2018-10