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The Favourite‐Longshot Bias, Bookmaker Margins and Insider Trading in a Variety of Betting Markets
Author(s) -
Cain Michael,
Law David,
Peel David
Publication year - 2003
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00174
Subject(s) - odds , insider , economics , competitor analysis , variety (cybernetics) , financial economics , market efficiency , econometrics , statistics , mathematics , logistic regression , management , political science , law
This paper verifies the existence of the favourite‐longshot bias in a variety of sports betting markets where odds are set by bookmakers, but the precise pattern of the bias is not identical. Evidence is found to support a central prediction of the Shin (1993) model, which asserts that bookmakers are impelled to create a bias in their odds because of the presence of insider traders: that margins increase with the number of competitors.