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DIRECT TESTS OF THE DIVERGENCE OF OPINION HYPOTHESIS IN THE MARKET FOR RACETRACK BETTING
Author(s) -
Lusht Kenneth M.,
Saunders Edward M.
Publication year - 1989
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1989.tb00522.x
Subject(s) - divergence (linguistics) , homogeneous , ex ante , economics , econometrics , efficient market hypothesis , financial economics , statistical hypothesis testing , alternative hypothesis , financial market , statistics , mathematics , finance , history , null hypothesis , macroeconomics , philosophy , linguistics , combinatorics , stock market , context (archaeology) , archaeology
The “divergence of opinion” hypothesis suggests predictable pricing effects in markets where assumptions of homogeneous investor expectations and unrestricted short selling do not hold. Direct tests of the hypothesis in traditional financial markets do not exist apparently because of the severity of several requirements, including that measurement of divergent ex‐ante expectations be unambiguously paired with associated ex‐post results. This and remaining conditions are met in direct tests of the hypothesis in a pricing arena where divergence of opinion influences are likely to be present: racetrack betting. Results provide no statistically significant support for the divergence of opinion hypothesis.