Market efficiency in person-to-person betting

Smith, MA, Paton, D and Vaughan Williams, L ORCID: https://orcid.org/0000-0002-9639-9217, 2006. Market efficiency in person-to-person betting. Economica, 73 (292), pp. 673-689. ISSN 0013-0427

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Abstract

Established gambling operators have argued that person-to-person wagering on Internet ‘betting exchanges’ represents unfair competition. In this paper we suggest that, in fact, betting exchanges have brought about significant efficiency gains by lowering transaction costs for consumers. We test this hypothesis using matched data on UK horse racing from betting exchanges and from traditional betting media. In contrast to traditional betting media, we find that betting exchanges exhibit both weak and strong form market efficiency. Further, we find evidence that an information based model explains the well documented favourite-longshot bias more convincingly than traditional explanations based on risk preferences.

Item Type:	Journal article
Description:	The definitive version is available at www.blackwell-synergy.com
Publication Title:	Economica
Creators:	Smith, M.A., Paton, D. and Vaughan Williams, L.
Date:	2006
Volume:	73
Number:	292
ISSN:	0013-0427
Identifiers:	Number Type 10.1111/j.1468-0335.2006.00518.x DOI
Rights:	© 2009 The London School of Economics and Political Science
Divisions:	Schools > Nottingham Business School
Record created by:	EPrints Services
Date Added:	09 Oct 2015 10:15
Last Modified:	09 Jun 2017 13:23
URI:	https://irep.ntu.ac.uk/id/eprint/10053

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