Information Efficiency in Financial and Betting Markets

Betting markets offer economists a fascinating case study of how information efficiency operates in a market. They incorporate features highly appropriate to a study of information efficiency, as each bet has a well-defined end point at which its value becomes certain. Using international examples, this is the first book to review and analyse the issue of information efficiency in financial and betting markets.

Part I The concept of information efficiency
1 Information efficiency in financial markets
LEIGHTON VAUGHAN WILLIAMS 5
2 Weak form information efficiency in betting markets
LEIGHTON VAUGHAN WILLIAMS 84
3 Semi-strong and strong form information efficiency in betting
markets
LEIGHTO N VA UGHA N WI LLIAMS 123
Part II Selected readings
4 An assessment of quasi-arbitrage opportunities in two fixed-odds
horse-race betting markets
MICHAEL A. SMITH , DAVID PATON AND LEIGHTON VAUGHAN
WILLIAMS 159
5 The presence of favourites and biases in bookmakers’ odds
WILLIAM COLLIER AND JOHN PEIRSON 172
6 Searching for semi-strong form inefficiency in the UK racetrack
betting market
MING - CHIEN SUNG , JOHNNIE E. V . JOHNSON AND ALISTAIR
C . BRUCE 179
vii

7 Models, markets, polls and pundits: a case study of
information efficiency
LEIGHTON VAUGHAN WILLIAMS 193
8 Longshot bias: insights from the betting market on men’s
professional tennis
DAVID FORREST AND IAN MCHALE 215
9 Biases and insider trading in exotic bets on thoroughbreds
LES COLEMAN AND MARTIN MCGRATH 231
10 On the improbability of information efficient parimutuel
betting markets in the presence of heterogeneous beliefs
WILLIAM HURLEY AND LAWRENCE MCDONOUGH 247
11 Modelling gambling demand in a laboratory casino:
discovering the importance of individual-specific effects
W. DAVID WALLS AND PATRICK J . HARVEY 262
12 Market efficiency of the 50–30–20–10 horse-racing spread
betting market
PAUL M. TWOMEY 277
13 Insider trading and bias in a market for state-contingent
claims
ADI SCHNYTZER AND YUVAL SHILONY 287
14 Rationality and efficiency in lotto games
VICTOR A. MATHESON AND KENT R. GROTE 313
15 Efficiency of the odds on English professional football matches
DAVID FORREST AND ROBERT SIMMONS 330
16 Modelling distance preference in flat racing via average
velocity
DAVID EDELMAN 339
17 Testing for market efficiency in gambling markets: some
observations and new statistical tests based on
a bootstrap method
IVAN A. PAYA, DAVID A. PEEL, DAVID LAW
AND JOHN PEIRSON 346
18 Information (in)efficiency in prediction markets
ERIK SNOWBERG , JUSTIN WOLFERS AND ERIC ZITZEWITZ