Why is There a Favourite-Longshot Bias in British Racetrack Betting Markets

Does transparency imply efficiency? The case of the European soccer betting market

“…Following Vaughan Williams and Paton (1997), we explore the role of transactions costs (measured via the overround) in explaining observed inefficiency differentials. Procedure 3 examines the log-likelihoods of two CL models, both with the outcome of each game as the dependent variable and containing an interaction term as an independent variable: Lodds X level of transactions costs (to ensure this term varies across the three possible game outcomes).…”

Market ecology and decision behaviour in state-contingent claims markets

“…Those studies that explain the bias in terms of supply and/or demand-side influences pay little attention to the potential impact of market ecology, despite the fact that the studies cover a diverse range of generic market forms and specific market types. More recently, however, Vaughan Williams and Paton (1997) suggest that the characteristics of particular race types may serve to influence supplier behaviour, hence contributing to observed bias, though the main emphasis of this contribution is to develop and test Shin's earlier approach. The specific objective of this paper is to develop and refine the investigation of the role of market ecology in adding to our understanding of the favourite-longshot bias.…”

“…Parimutuel markets will be characterised by a lower incidence of favouritelongshot bias than bookmaker markets. Shin (1993) and Vaughan Williams and Paton (1997) introduce the notion of races (markets) that, in terms of their informational characteristics, are considered more or less susceptible to 'insider' activity. Certain types of race may be regarded, respectively, as informationally relatively transparent and relatively opaque.…”

“…This represents a significant improvement over the informational basis with which earlier studies of UK parimutuel activity have operated. Thus, for example, both Marsden (1990, 1991) and Vaughan Williams and Paton (1997) confine their analysis of parimutuel markets to winning horses. The reason for this is that the Tote merely declares odds of the winning horse; odds of all other participants, had they won, are not published.…”

Does society underestimate women? Evidence from the performance of female jockeys in horse racing

“…This bias has been found in pari-mutuel pools (e.g. Snyder, 1978, among many others), bookmaker markets (Vaughan Williams and Paton, 1997), and the betting exchanges (Smith et al, 2006). Explanations range from the misestimation of win probabilities (Griffith, 1949), risk-loving behaviour (Weitzman, 1965), heterogeneous beliefs (Ali, 1977) and adverse selection (Shin, 1993).…”