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The ordinal efficiency of betting markets: an exploded logit approach

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Abstract:

This article offers a new perspective on efficiency in betting markets by examining the degree to which finishing order in horse races corresponds to probabilities inherent in odds across different categories of horse race. The application of an exploded logit procedure reveals a significantly greater degree of ordinal efficiency in higher relative to lower-class races. Explanations for the phenomenon include differences in prize-related incentives, cross-market distinctions in information markets and differential opportunity/incentive for market manipulation.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840802314622

Affiliations: 1: Centre for Risk Research, University of Southampton, Highfield, Southampton, UK 2: Nottingham University Business School, Jubilee Campus, Nottingham, UK

Publication date: December 1, 2010

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