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Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries

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Thaler, Richard H, Ziemba, William T·1988·Journal of Economic Perspectives
DOI 10.1257/jep.2.2.161
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Abstract

Economists have given great attention to stock markets in their efforts to test the concepts of market efficiency and rationality. Yet wagering markets are, in one key respect, better suited for testing market efficiency and rationality. The advantage of wagering markets is that each asset (bet) has a well-defined termination point at which its value becomes certain. The absence of this property is one of the factors that has made it so difficult to test for rationality in the stock market. Since a stock is infinitely lived, its value today depends both on the present value of future cash flows and on the price someone will pay for the security tomorrow. Indeed, one can argue that wagering markets have a better chance of being efficient because the conditions (quick, repeated feedback) are those which usually facilitate learning. However, empirical research has uncovered several interesting anomalies. While there are numerous types of wagering markets, legal and otherwise, this column will concentrate on racetrack betting and lotto-type lottery games.

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Research works printed but not linked: 21

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Authors
Thaler, R. H., & Ziemba, W. T.
Affiliations
  • Cornell University (US)
  • University of British Columbia (CA)
ORCID
Thaler, Richard H
Venue
Journal of Economic Perspectives
Publisher
American Economic Association
Published
1988-05-01
Volume
2
Issue
2
Pages
161-174
ISSN
0895-3309 (ISSN-L)
DOI
10.1257/jep.2.2.161
OpenAlex
W2084913862
Cited by
621
References
2
Citations by year
2026: 18 · 2025: 14 · 2024: 16 · 2023: 12 · 2022: 18 · 2021: 27 · 2020: 14 · 2019: 16 · 2018: 24 · 2017: 17 · 2016: 14 · 2015: 21 · 2014: 13 · 2013: 29 · 2012: 23
FWCI
12.61
Type
journal article
Language
en
Open access
Locations
The Journal of Economic Perspectives (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Sports Analytics and Performance
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
  • Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
Keywords
market efficiency, rationality, market anomalies, lotteries, betting odds, market efficiency testing

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