MEASURING THE EXTENT OF INSIDE TRADING IN HORSE BETTING MARKETS

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Published: Jan 2, 2013
DOI: https://doi.org/10.5750/jgbe.v4i2.554

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Adi Schnytzer
Departments of Economics, Bar Ilan University
Martien Lamers
Department of Financial Economics, Ghent University
Vasiliki Makropoulou
Athens University of Economics and Business

Abstract

This paper develops a theoretical framework for and models optimal price setting by on-course bookmakers in the racetrack betting market. This framework suggests that opening prices should include a premium that compensates bookmakers for the risk that insiders will account for private information and exploit any mis-pricing made by the bookmakers. The model is an extension of the model developed by Makropoulou and Markellos (2007) for football betting to the racetrack betting market. Using an extensive dataset and performing Monte Carlo simulations to calculate the potential value of new information, we measure insider trading in the Australian racetrack betting market.

Article Details

Issue
Vol. 4 No. 2 (2010)
Section
Articles

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