Thaler, R. H. and W. T. Ziemba. (1988). "Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries." Journal of Economic Perspectives, 2(2), 161--174.  Home/Search   Document Not in Database   Summary   Related Articles   Check

....the best forecasts of future outcomes given all information, even if that information is distributed across many sources. Supporting evidence can be found in empirical studies of options markets [14] political stock markets [7, 8, 22] sports betting markets [3, 9, 27] horse racing markets [30], market games [23, 24] and laboratory investigations of experimental markets [6, 25, 26] The process of information incorporation is, at its essence, a distributed computation. Each trader begins with his or her own information. As trades are made, summary information is revealed through ....

R. H. Thaler and W. T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161--174, 1988.

....bets on the outcomes of uncertain future propositions. Examples include stock markets like NASDAQ, options markets like CBOE [17] futures markets like CME [30] other derivatives markets, insurance markets, political stock markets [11, 12] sports betting markets [7, 13, 32] horse racing markets [33], idea futures markets [16] decision markets [14] and even market games [4, 24, 25] The economic value of securities markets istwo fold. First, they allow traders to hedge risk, or to insure against undesirable outcomes. For example, the owner of a stockmightbuy a put option (the right to sell ....

Richard H. Thaler and William T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives,2(2):161--174, 1988.

.... in political stock markets, like the Iowa Electronic Market (IEM) can furnish better estimates of likely election outcomes than traditional polls [10, 11] odds in horse races, determined solely by how much is bet on which horses, match very closely with the horses actual frequencies of winning [27, 30]; and point spread betting markets yield unbiased predictions of sporting event outcomes [12] 2.1 Securities markets and no arbitrage Almost all economic theories of equilibrium assume, at a minimum, that equivalent portfolios are priced consistently with one another, such that arbitrage ....

....22] Beyond the controlled setting of the laboratory, empiricists have analyzed the forecast accuracy of public markets. Perhaps the most direct tests involve sports betting markets. Several studies demonstrate that odds on horses correlate well with the actual frequencies of victory at the track [27, 30]. Other sports betting markets, like the National Basketball Association point spread market, provide very accurate forecasts of likely game outcomes [12] The Iowa Electronic Market (IEM) 8 supports trading in securities tied to the outcome of political and financial events. Their 1988 market, ....

Richard H. Thaler and William T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161--174, 1988.

.... political stock markets, like the Iowa Electronic Market (IEM) 1 can furnish better estimates of likely election outcomes than traditional polls [11, 12] odds in horse races, determined solely by how much is bet on which horses, match very closely with the horses actual frequencies of winning [1, 30, 32, 33, 35]; and point spread betting markets yield unbiased predictions of sporting event outcomes [14] Several studies demonstrate that, in a laboratory setting, markets are often able to aggregate information optimally [10, 25, 26, 27] In a game without monetary rewards, incentives to reveal ....

....winner, we investigate how accurately HSX award option prices re ect all likelihoods of winning. For example, if prices are accurate, then among all options with a normalized price of H 0.1, about one in ten should end up winning. Our accuracy analysis is similar to that conducted for horse races [1, 30, 32, 33, 35] and other sports betting markets involving real money. We collected prices of award options associated with the 2000 Oscars, Grammies, and Emmies, for a total of 135 options. Grammy options (nine categories) and Emmy options (ten categories) functioned exactly as Oscar options, though winning ....

R. H. Thaler and W. T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161-174, 1988.

....signals. As an example, the odds in a horse race, determined solely by market forces at the track, can be viewed as assessments of the likelihoods that the various horses will win. Empirical studies verify that odds on horses do indeed match very closely with their observed frequencies of winning [1, 18, 19, 20, 22]. As traditional markets expand onto electronic platforms, and as new electronic marketplaces emerge, price information will be available and accessible in quantities previously unimaginable. Nevertheless, markets will still only cover a miniscule fraction of arenas for which informed forecasts ....

....Beyond the controlled setting of the laboratory, empiricists have analyzed the forecast accuracy of public markets. Perhaps the most direct tests involve horse race betting markets. Several studies demonstrate that odds on horses correlate well with the actual frequencies of victory [1, 18, 19, 20, 22]. There does appear to be a small but consistent bias: favorites are underpriced and longshots are overpriced. Weitzman [22] and Ali [1] show how an assumption that the crowd as a whole is risk seeking can explain this favorite longshot bias. Beyond horse racing, sports betting markets as a whole ....

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Richard H. Thaler and William T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161-174, 1988.

....real markets, a common interpretation of prices is as an amalgamation of opinions. For example, the price of a stock represents the market evaluation of the expected present value of future dividends, and odds in a horse race summarize the bettors beliefs about the winning horse s identity [71, 78]. Under speci c regularity conditions, the exact dependence of prices on beliefs can be characterized [28, 66, 68, 82] and compared with the opinion pools of Section 2.1. In contrast to the Bayesian or axiomatic approaches, economic models are usually built upon behavioral assumptions (e.g. that ....

Richard H. Thaler and William T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161-174, 1988.

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Thaler, R. H. and W. T. Ziemba. (1988). "Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries." Journal of Economic Perspectives, 2(2), 161--174.

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R. H. Thaler and W. T. Ziemba, Anomalies: Parimutuel betting markets: Racetracks and lotteries, Journal of Economic Perspectives, 2(2) (1988) 161--174.

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Thaler, Richard H. and William T. Ziemba, "Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, 1988, 2:2, pp. 161 - 74.

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Richard H. Thaler and William T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161--174, 1988. 15

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R. H. Thaler, W. T. Ziemba, Anomalies: Parimutuel betting markets: Racetracks and lotteries, Journal of Economic Perspectives 2 (2) (1988) 161-- 174.

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R. H. Thaler and W. T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. Journal of Economic Perspectives, 2(2):161--174, 1988.

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R. H. Thaler and W. T. Ziemba. Anomalies: Parimutuel betting markets: Racetracks and lotteries. J. Economic Perspectives, 2(2):161-174, 1988.

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