Sports betting market provides a fine environment for examining market efficiency without the complicating factors associated with typical financial markets. Using a novel data from a sports lottery which consists of futures contracts on sporting events, I document market inefficiency and examine participants’ leaning behavior over time. Specifically, I find that participants underbet outcomes which lie at the extreme end of their betting tickets. The magnitude of this bias is so great that a naive betting strategy utilizing this bias, since the sports lottery's inception in 2008 through 2010, would have resulted in an average after-tax return that was greater than 75%. The size of the abnormal return is even more surprising because these sports lotteries have an unconditional expected return of less than -50% due to a low payout rate. There is some evidence of learning behavior overtime, but not enough to eliminate the above bias.
Keywords: Market efficiency; Market anomaly; Learning behavior; Sports betting markets
학회소식
공지사항
[2011년 제 4차] Market Inefficiency and Learning Behavior: The Case
작성자 : 관리자
조회수 : 831
게시일 :
2011-12-07