Searching for the favourite-longshot bias down under: an examination of the New Zealand pari-mutuel betting market

Authors: Gandar J. M.; Zuber R. A.; Johnson R.S.

Source: Applied Economics, Volume 33, Number 13, 20 October 2001 , pp. 1621-1629(9)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This paper tests for the presence of the favourite-longshot bias in a new setting. This bias – the tendency for bettors to underbet favourites and overbet longshots – has been found in most studies of pari-mutuel and bookmaking betting markets in the USA, the UK and Australia. However, there is growing evidence that in at least some pari-mutuel betting markets there is no favourite-longshot bias. This paper examines the previously unexplored New Zealand pari-mutuel betting market on horse races for evidence of this bias. Utilizing a large sample of recent New Zealand thoroughbred horse races, it is found that while early, off-track bettors price this bias into odds, late (on- and off-track) bettors eliminate much of the bias by the close of betting. That is, the results reinforce the view that not all pari-mutuel betting markets are characterized by a favourite-longshot bias at the close of betting. Evidence is also found that late bettors in this market are smart bettors.

Language: English

Document Type: Research article

Publication date: 2001-10-20

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