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Bettors Love Skewness, Not Risk, at the Horse Track
Open accessAbstract
Studies of horse race betting have empirically established a long shot anomaly; that is, low‐probabiliy, high‐variance bets (long shots) provide low mean returns and high‐probability, lowvariance bets provide relatively high mean returns. Because bettors willingly accept low‐return, high‐variance bets, researchers conclude that bettors are risk lovers. In this study, we show that the data are at least as consistent with risk aversion as they are with risk loving when one explicitly considers the skewness of bet returns. Because the variance and skewness of bet returns are highly correlated, bettors may appear to prefer variance when it is skewness that they crave.
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Citations
Cited by
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Goetzmann, W. N., & Kumar, A. (2008) · Review of Finance · doi:10.1093/rof/rfn005 · Cited by 1,222
Why are Gambling Markets Organised so Differently from Financial Markets?
Levitt, S. D. (2004) · The Economic Journal · doi:10.1111/j.1468-0297.2004.00207.x · Cited by 377
Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?
Snowberg, E., & Wolfers, J. (2010) · doi:10.3386/w15923 · Cited by 44
Do Realized Skewness and Kurtosis Predict the Cross-Section of Equity Returns?
Amaya, D., Christoffersen, P., Jacobs, K., & Vasquez, A. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.2024782 · Cited by 28
Are Sports Bettors Biased toward Longshots, Favorites, or Both? A Literature Review
Newall, P. W. S., & Cortis, D. (2021) · Risks · doi:10.3390/risks9010022 · Cited by 14
Metadata
- Authors
- Golec, J., & Tamarkin, M.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1998-02
- Volume
- 106
- Issue
- 1
- Pages
- 205-225
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2093613276
- Cited by
- 398
- References
- 0
- FWCI
- 7.64
- Type
- journal article
- Language
- en
- Open access
- green
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- Golec, J., & Tamarkin, M. (1998). Bettors Love Skewness, Not Risk, at the Horse Track. Journal of Political Economy. https://doi.org/10.1086/250007
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