Information and efficiency: an empirical study of a fixed odds betting market
The efficiency of the fixed odds betting market for football in England is investigated. It is the efficiency of how market participants utilize available information that is tested. A model of bookmaker behaviour is presented in which the bookmaker maximizes their expected share of the total amount bet. It is found that an expected profit maximizing bookmaker could set market inefficient odds. Several empirical tests using the ordered probit model with data on prices and publicly available information are carried out. Evidence of market inefficiency is identified offering profitable betting opportunities.