* Major focus on the variety of market efficiencies
* Significant coverage of sports from racing to jai alai.
* New studies of betting exchanges and internet wagering markets
Its basic empirical research and investigation of pure theories of investment in the sports and lottery markets make this volume a winner. These markets are simpler to study than traditional financial markets, and their expected values and outcomes are uncomplicated. By means of new overviews of scholarship on the industry side of racetrack and other betting markets to betting exchanges and market efficiencies, contributors consider a variety of sports in countries around the world. The result is not only superior information about market forecasting, but macro- and micro-analyses that are relevant to other markets. Easily studied sports markets reveal features relevant for more complex traditional financial markets Significant coverage of sports from racing to jai alai New studies of betting exchanges and Internet wagering markets
Front Cover 1
Handbook of Sports and Lottery Markets 4
Copyright Page 5
Table of Contents 8
List of Contributors 18
Preface 20
Introduction to the Series 24
Part 1: Industry Studies 26
Chapter 1. Pari-Mutuel Horse Race Wagering—Competition from Within and Outside the Industry 28
1. Introduction 29
2. Competition from Casino Gaming 30
3. Competition from State Lotteries 32
4. Competition from Professional Sports 33
5. Competition from Live Racing 33
6. Competition from Simulcast Wagering 36
7. Summary and Conclusions 38
References 39
Chapter 2. Modeling Money Bet on Horse Racesin Hong Kong 42
1. Introduction 43
2. Variables Examined 43
2.1. Outcome Variables 43
2.2. Independent Variables 44
3. Results and Discussion 44
4. Conclusion 46
References 47
Appendix: 31 Independent Variables Examined 48
Part 2: Utility, Probability, and Pace Estimation 50
Chapter 3. Empirical Evidence on the Preferences of Racetrack Bettors 52
1. Introduction 53
2. Some Stylized Facts 55
3. Expected Utility 58
4. Distortions of Probabilities 61
5. Reference Points and Asymmetric Probability Weights 64
6. Heterogeneous Preferences 67
7. Exotic Bets 70
8. Concluding Remarks 71
References 72
Chapter 4. Approximating the Ordering Probabilities of Multi-Entry Competitions by a Simple Method 76
1. Introduction 77
2. Theoretical Results of the Limiting Cases 78
3. A Simple Approximation 81
3.1. Empirical Analysis for the Approximated Henery Model 81
3.2. Empirical Analysis for the Stern Model 82
4. Conclusion 84
References 85
Appendix: Proof of Theorem 1 86
Chapter 5. Modeling Distance Preference and Pace Character in Thoroughbred Turf Racing 92
1. Background 93
2. Case Study 1: Sha Tin (Hong Kong, SAR, PRC) 94
3. Case Study 2: Randwick (Sydney, Australia) 96
4. Qualitative Questions 102
4.1. Do Distance Specialists Exist? 102
4.2. Pace, Class, and Time: The Central Paradox of Racing 103
4.3. Jockeys: Distance or Pace Preference? 104
5. Discussion 105
References 105
Part 3: Favorite-Longshot Bias in the Win Market 106
Chapter 6. The Favorite-Longshot Bias: An Overview of the Main Explanations 108
1. Introduction 109
2. Notation 112
3. Misestimation of Probabilities 112
4. Market Power by Informed Bettors 114
5. Preference for Risk 115
6. Heterogeneous Beliefs 118
7. Market Power by Uninformed Bookmaker 120
8. Limited Arbitrage 121
9. Simultaneous Betting by Insiders 122
10. Timing of Bets 124
10.1. Early Betting 124
10.2. Late Betting 124
References 125
Chapter 7. Examining Explanations of a Market Anomaly: Preferences or Perceptions? 128
1. Introduction 129
2. Preferences—Expected Utility Models with Linear Probabilities 133
3. Perceptions—The Weighting of True Probabilities 136
4. Perceptions—informational Effects 137
5. Definition of Models and Implications for Combinatoric Bets 139
6. Using Combinatoric Markets to Test the Models 144
6.1. Testing Conditional Independence 148
6.2. Relaxing Conditional Independence Further 150
7. Conclusion 154
References 155
Appendix A: Pricing of Combinatoric Bets Using Conditional Independence 159
Appendix B: Data 160
Chapter 8. Unifying the Favorite-Longshot Bias with Other Market Anomalies 162
1. Introduction 163
2. Biases Found in the Previous Literature 163
3. What Causes the Favorite-Longshot Bias at the Racetrack? 165
3.1. The Casual Bettor 168
3.2. The Serious or Regular Bettor 169
3.3. The Arbitrageur 173
4. Is it Risk or Information? 175
5. Can the Model Explain the Biases in Other Markets? 181
6. Conclusion 183
References 183
Chapter 9. The Favorite-Longshot Bias in S& P 500 and FTSE 100 Index Futures Options: The Return to Bets and the Cost of Insurance
1. Introduction 187
2. Methodology 191
3. Results 195
3.1. Results for Quarterly Options on Stock Index Futures 199
3.2. Results for Monthly Options on Stock Index Futures 200
4. Conclusions 203
References 204
Part 4: Weak Market Efficiency 206
Chapter 10. Efficiency of Racing, Sports, and Lottery Betting Markets 208
1. Introduction 209
2. Extent of Gambling in the U.S. 212
3. Racetrack Betting Markets 215
3.1. Introduction to Racetrack Betting 215
3.2. Win Market 215
3.3. Place and Show Markets 220
3.4. Place and Show Probabilities 221
3.5. Optimal Capital Growth 226
3.6. Implementing the System and Empirical Results 228
3.7. Does the System Still Provide Profits? 231
3.8. Exotic Markets 232
3.9. Cross-Track Betting 233
4. The Football Betting Market 234
5. The Basketball Betting Market 236
6. Lotteries 237
6.1. Introduction to Lotteries 237
6.2. Inefficiencies with Unpopular Numbers 239
References 242
Chapter 11. Point Spread and Odds Betting: Baseball, Basketball, and American Football 248
1. Introduction 249
2. Efficiency of Odds Betting Markets 249
2.1. Horse Race Betting 249
2.2. Baseball 251
3. Efficiency of Point Spread Betting Markets 252
3.1. American Football 252
3.2. Basketball 255
4. Relationship of Point Spread and Odds Betting 255
4.1. Normal Distribution Result 256
4.2. Applications of the Normal Approximation 258
5. The Normal Model and Mid-Event Wagering 259
6. Summary 261
References 262
Chapter 12. Comparing Efficiency of the Over/Under-Bets on NFL and NBA Games 264
1. Introduction 265
2. The Sports Betting Market: Setting Point Spreads and Over/Unders 265
3. NFL and NBA Betting Market Efficiency 267
4. Conclusion 274
References 276
Chapter 13. Arbitrage and Risk Arbitrage in Team Jai Alai 278
1. Introduction 279
2. The Arbitrage 283
3. Risk Arbitrages 286
4. Final Remarks 294
References 296
Part 5: Semi-Strong Form Efficiency 298
Chapter 14. Semi-Strong Form Information Efficiency in Horse Race Betting Markets 300
1. Introduction 301
2. Semi-Strong Form Efficiency in Horse Race Betting Markets: Single Variable Models 302
2.1. Arbitrage Between Parallel Markets 303
2.2. Professional Predictions 310
2.3. Betting Volume 314
2.4. Post Position 315
2.5. Pedigree 316
2.6. Distance Preference 317
2.7. Single Variable Models: Overview 317
3. Semi-Strong Form Efficiency in Horse Race Betting Markets: Multiple Variable Models 318
3.1. Distribution-Based Methods 319
3.2. Distribution-Free Methods 323
3.3. Multiple Variable Models: Overview 325
4. Semi-Strong Form Efficiency in Horse Race Betting Markets: Conclusion 326
References 327
Chapter 15. The Dosage Breeding Theory for Horse Racing Predictions 332
1. Introduction 333
2. The Racetrack as a Sequence of Markets 335
3. The Dosage Index and Performance Measures 336
4. Data Acquisition 339
5. Application of Breeding Information and Performance Measures to Refine Estimated Win Probabilities for the Kentucky Derby 339
6. The Kelly Betting Model 345
7. The Kentucky Derby, 1981–2006 347
8. The Preakness Stakes, 1946–2006 352
9. The Belmont Stakes, 1946–2006 354
10. Conclusions 355
References 356
Appendix A: Data Sources 358
A.1. Public’s Wagering 358
A.2. Pedigrees 358
A.3. Chef-de-Race Listings 358
A.4. Experimental Free Handicap Listings 359
A.5. Results of the Kentucky Derby and Major Races Prior to the Kentucky Derby 359
Appendix B: Kentucky Derby, Preakness, and Belmont Winners, 1946–2006 359
Chapter 16. Efficiency in Horse Race Betting Markets: The Role of Professional Tipsters 366
1. Introduction 367
2. The Model 368
3. Data 370
3.1. Tips and Rewards Rules 370
3.2. Public Information 371
3.3. Measuring Forecast Originality 372
4. Results 373
4.1. Results of Frequency Tests 373
4.2. Originality and Accuracy 373
4.3. Anti-Herding and Excess Originality 375
5. Conclusion 376
References 376
Appendix: Proof of Equation (5) 378
Part 6: Prediction Markets 380
Chapter 17. Index Betting for Sports and Stock Indices 382
1. Background 383
2. How Index Betting Operates 385
3. Setting Spreads 387
4. Spreads in Performance Indices 390
5. Advantageous Bets 393
6. Regulation, Taxation, and Biases in Spread Betting Markets 397
References 399
Appendix A 402
Appendix B 403
Appendix C 405
Chapter 18. Prediction Markets: From Politics to Business (and Back) 410
1. Overview 411
2. The First Prediction Markets 413
3. Markets in the Lab 416
4. Current Uses of Prediction Markets: Business and Policy 418
5. Future Directions: Decision Markets 422
6. Potential Pitfalls 423
7. Conclusion 425
References 426
Chapter 19. Betting Exchanges: A Technological Revolution in Sports Betting 428
1. Introduction 429
2. The Operation of Betting Exchanges 429
3. Empirical Models and Evidence Concerning Weak-Form Information Efficiency in Betting Exchanges 434
4. New Evidence on the Degree of Bias in Betting Exchange Odds 437
5. Conclusions 441
References 442
Part 7: Soccer 444
Chapter 20. Soccer Betting in Britain 446
1. Introduction 447
2. Development of Soccer Betting 448
3. Transactions Costs in the Fixed Odds Market 451
4. Early Study of Market Efficiency 454
5. Tipsters 456
6. Fundamental Analysis as an Aid to Soccer Betting 457
7. Technical Analysis 462
8. Sentiment 465
9. The Future of Research on Soccer Betting 468
References 469
Chapter 21. Efficiency of Soccer Betting Odds—Evidence from a Pan-European Electronic Market 472
1. Introduction 473
2. The Soccer Betting Market 474
3. Data Description 475
4. Efficiency Tests 476
4.1. Statistical Tests 476
4.2. Economic Tests 479
5. Conclusion 480
References 481
Part 8: Lotteries 482
Chapter 22. How to Design a Lottery 484
1. Introduction 485
2. The Odds of Winning a (Pari-Mutuel) Lottery 489
3. The Expected Value Calculation 490
4. Higher Moments of the Prize Distribution 492
5. Econometric Methodology, Data, and Estimates 494
6. Game Design Simulations 499
7. Conclusion 501
References 502
Appendix: The Expected Value Formula 504
Chapter 23. The Statistics of Lotteries 506
1. Introduction 507
2. Prize Structure and Winning Chances 510
3. Tests of Randomness 516
4. Gambler Choices 521
References 527
Chapter 24. U.S. Lotto Markets 528
1. Introduction 529
2. Differences Between American and European Lotteries 534
3. Fungibility of Lottery Revenues 537
4. Efficiency of Lottery Markets—Part 1 541
5. Efficiency of Lottery Markets—Part 2 544
6. Efficiency of Lottery Markets—Part 3 546
7. Conclusions 547
References 548
Subject Index 550
Author Index 558
Preface
Donald B. Hausch, Madison
William T. Ziemba, Vancouver
This volume surveys the broad subject of sports and lotto investments. The various chapters cover many sports, such as soccer, NFL and college football, baseball, basket-ball, Jai Alai, and lotto markets. We do not discuss casino gambling nor the statistics of sports; rather, we focus on the financial markets associated with legal betting on sports and lotto events. All the chapters are newly written academic surveys that we commissioned for this volume. In certain areas, this volume updates to 2008 our earlier edited volume [Hausch, D. B., V. Lo, and W. T. Ziemba (HLZ), 1994, Efficiency of Racetrack Betting Markets, Academic Press, San Diego, CA]. That volume became not only a classic, but a cult item as it helped usher in professional racetrack betting. While small in comparison with hedge funds, the various syndicates across the world have made about $10 billion using computerized betting strategies. This volume continues with some of the basic research behind such investment teams and the academic theory of investment in sports and lotto markets. HLZ reprinted older classic papers and complemented them with new original work. This current volume is entirely composed of newly written chapters that build on earlier papers. So, in our view, HLZ (which was reprinted in its entirety with no changes except a new preface as HLZ, 2008, 2nd ed., World Scientific, Singapore) and this volume are companion books in this field. Other books that discuss similar topics are Vaughan Williams, L., 2003, The Economics of Gambling, Routledge, London; Vaughan Williams, L., 2005, Information Efficiency in Financial and Betting Markets, Cambridge University Press, Cambridge, UK, which are highly recommended; and our trade books, Ziemba, W. T., and D. B. Hausch, 1984, Beat the Racetrack, Harcourt, Brace and Jovanovich, NewYork; Ziemba, W. T., and D. B. Hausch, 1986, Betting at the Racetrack, Dr Z Investments, Inc., San Luis Obispo, CA; Ziemba, W. T., and D. B. Hausch, 1987, DrZ’s Beat the Racetrack, William Morrow, New York.
The volume is organized into eight parts. Part I discusses the industry side of the racetrack and other betting markets. Ali and Thalheimer discuss the effects of competition from casinos, lotteries, professional sports, and horse racing and wagering on racetrack handle. Bacon-Shone and Woods empirically study the factors that influence both the extent of the public’s wagering and its allocation across the betting pools. One factor addressed is the partial rebate sometimes available to losers of large wagers.
Part II studies the bettors and horses in a race. Jullien and Salanié survey the literature dealing with the empirical estimation of the bettor’s utility function, including addressing issues such as representative bettors versus heterogeneous beliefs, and expected versus nonexpected utility. Lo and Bacon-Shone devise probabilities for multientry competitions. Edelman empirically studies the running patterns of race horses, finding distance preferences and establishing pace characteristics somewhat at odds with established physiological results on optimal running.
Part III discusses the well-established favorite-longshot bias in horse racing, which is the tendency for favorites to be underbet and longshots to be overbet. Ottaviani and Sørensen present various theoretical constructs that generate this bias. Snowberg and Wolfers use massive data sets to empirically estimate the recent favorite-longshot bias in the U.S., Australia, and other locales. They argue that the anomaly is based more on perceptions than preferences. That means that bettors overestimate the chances of low probability events. They also show that extreme favorites no longer have positive expected value as Ziemba and Hausch found in 1986. This updates the studies surveyed in Ziemba and Hausch (1986); see also the updated graph in Ziemba’s chapter in Part IV and Ziemba, W. T., 2004, Behavioral Finance, Racetrack Betting and Options and Futures Trading, Mathematical Finance Seminar, Stanford University, Palo Alto, CA. Busche, K., and C. Hall, 1988, An Exception to the Risk Preference Anomaly, Journal of Business 61,337–346; Busche, K., 1994, Efficient Market Results in an Asian Setting, in HLZ; Vaughan Williams, L., and D. Paton, 1998, Why Are Some Favourite-Longshot Biases Positive and Others Negative? Applied Economics 30,1505–1510 discuss reverse biases in Asia and other locales. Sobel and Ryan document a pattern of public betting that varies by the day of the week. Different levels of casual and serious bettors at the track on different days of the week can explain this variation and provides a basis for understanding the favorite-longshot bias. Tompkins, Ziemba, and Hodges show that there are similar biases in the S&P 500 and FTSE 100 index put and call options.
Part IV discusses weak form market efficiency in racing and various sports events. Ziemba discusses efficiency in racing and other sports as well as in lotto games. He describes the place and show betting system that arises because these markets are more complex than the win market. The original 1981 system, which was popularized in the trade books by Ziemba and Hausch (1984, 1986, and 1987), still basically produces profits but needs rebates to do this because, currently, so much of the public’s wagers do not enter the pools until after the race has started. This is because about 87% of the typical track’s handle is bet off that track by other bettors and by professional syndicates. Ziemba also discusses cross-track betting, NFL, and NBA games and provides an introduction to lotteries. The latter topic is discussed in three chapters in Part VIII. Stern studies point spread and odds betting in U.S. college and professional baseball, basket-ball, and football and how these two betting concepts are related. He also investigates whether point spread betting is as efficient in these sports as it is in horse racing. Also, he shows how to estimate the odds of winning midway during a game based on the current score and the original odds line. Golec and Tamarkin analyze the market for over/under bets on NFL and NBA games. Lane and Ziemba discuss pure, no risk arbitrage and risk arbitrage in team jai alai. Most of their results generalize to other sports betting games such as those covered by betting exchanges like London’s Betfair as discussed in Part VI as well as some financial market applications. The arbitrage conditions are utility free and the risk arbitrage investments are based on the Kelly capital growth log utility criterion.
Part V discusses semi-strong form efficiency where public information is added to prices. Johnson and Sung provide a comprehensive survey of this subject in various racing markets. Gramm and Ziemba discuss the application of the breeding theory called dosage to the U.S. triple crown races, the Kentucky Derby, the Preakness, and the Belmont Stakes. The key idea is that, since the horses have never raced 1¼ miles before the Kentucky Derby or 1½ miles before the Belmont Stakes, the public does not have direct evidence of a horse’s speed and stamina for these distances. However, a horse’s pedigree might provide indirect evidence, particularly if the pedigree includes stallions whose offspring exhibit consistent levels of speed and stamina. This chapter studies whether this indirect pedigree evidence can be used to profitably revise the public’s win odds. And indeed this is the case, with the greatest gains associated with the 1½ mile Belmont, followed by the 1¼ mile Kentucky Derby. For the 316 mile Preakness, however, pedigree offered no gains. Since many horses in the Preakness have raced 316 miles before the Preakness (including some who ran 1½ miles in the Derby just two weeks earlier), the odds established by the public have incorporated direct evidence of the each horse’s speed and stamina for this distance, making indirect pedigree evidence of limited incremental value. Gergaud and Deschamps investigate the effectiveness of the recommended horses from tipsters in Paris.
Part VI presents three chapters related to the recent explosion of interest in betting exchanges. Haigh and Vaughan Williams discuss index betting for sports and stock indices. The idea is that the house sets an x and a y for each event where y > x. The difference y – x is their profit and expenses and reserve for risk. Then those that go long do it at y and those who go short do it at x. If the number of longs and shorts is about equal, then the house gets the y – x. But if it is not, then the house bears some risk. The payoff to longs is the final price z – y and to the shorts it is x – z. This activity is tax free in the UK, so it is a popular way to bet on index futures. The spread cost is balanced by the tax savings in regular futures accounts by investors. Snowberg, Wolfers, and Zitzewitz investigate the prediction ability of internet wagering markets in various areas including, especially, politics. The contracts available form a fascinating description of modern times from elections, to war, to sports betting, all of which induce good probabilities that are...
| Erscheint lt. Verlag | 11.8.2011 |
|---|---|
| Mitarbeit |
Mitglied der Redaktion: Kenneth J. Arrow, G. Constantinides, H.M Markowitz, R.C. Merton, S.C. Myers, P.A. Samuelson, W.F. Sharpe |
| Sprache | englisch |
| Themenwelt | Recht / Steuern ► Wirtschaftsrecht |
| Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung | |
| Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre | |
| Wirtschaft ► Volkswirtschaftslehre | |
| ISBN-10 | 0-08-055995-6 / 0080559956 |
| ISBN-13 | 978-0-08-055995-7 / 9780080559957 |
| Haben Sie eine Frage zum Produkt? |
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