Handbook of Sports and Lottery Markets

Handbook of Sports and Lottery Markets

by Donald B. Hausch, W.T. Ziemba, G. Constantinides, H.M Markowitz, R.C. Merton, S.C. Myers, P.A. Samuelson, W.F. Sharpe, Kenneth J. Arrow
Released August 2011
Publisher(s): North Holland
ISBN: 9780080559957

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Book description

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

Table of contents

  1. Front Cover
  2. Handbook of Sports and Lottery Markets
  3. Copyright Page
  4. Table of Contents (1/2)
  5. Table of Contents (2/2)
  6. List of Contributors
  7. Preface
  8. Introduction to the Series
  9. Part 1: Industry Studies
    1. Chapter 1. Pari-Mutuel Horse Race Wagering—Competition from Within and Outside the Industry
      1. 1. Introduction
      2. 2. Competition from Casino Gaming
      3. 3. Competition from State Lotteries
      4. 4. Competition from Professional Sports
      5. 5. Competition from Live Racing
      6. 6. Competition from Simulcast Wagering
      7. 7. Summary and Conclusions
      8. References
    2. Chapter 2. Modeling Money Bet on Horse Racesin Hong Kong
      1. 1. Introduction
      2. 2. Variables Examined
        1. 2.1. Outcome Variables
        2. 2.2. Independent Variables
      3. 3. Results and Discussion
      4. 4. Conclusion
      5. References
      6. Appendix: 31 Independent Variables Examined
  10. Part 2: Utility, Probability, and Pace Estimation
    1. Chapter 3. Empirical Evidence on the Preferences of Racetrack Bettors
      1. 1. Introduction
      2. 2. Some Stylized Facts
      3. 3. Expected Utility
      4. 4. Distortions of Probabilities
      5. 5. Reference Points and Asymmetric Probability Weights
      6. 6. Heterogeneous Preferences
      7. 7. Exotic Bets
      8. 8. Concluding Remarks
      9. References
    2. Chapter 4. Approximating the Ordering Probabilities of Multi-Entry Competitions by a Simple Method
      1. 1. Introduction
      2. 2. Theoretical Results of the Limiting Cases
      3. 3. A Simple Approximation
        1. 3.1. Empirical Analysis for the Approximated Henery Model
        2. 3.2. Empirical Analysis for the Stern Model
      4. 4. Conclusion
      5. References
      6. Appendix: Proof of Theorem 1 (1/2)
      7. Appendix: Proof of Theorem 1 (2/2)
    3. Chapter 5. Modeling Distance Preference and Pace Character in Thoroughbred Turf Racing
      1. 1. Background
      2. 2. Case Study 1: Sha Tin (Hong Kong, SAR, PRC)
      3. 3. Case Study 2: Randwick (Sydney, Australia) (1/2)
      4. 3. Case Study 2: Randwick (Sydney, Australia) (2/2)
      5. 4. Qualitative Questions
        1. 4.1. Do Distance Specialists Exist?
        2. 4.2. Pace, Class, and Time: The Central Paradox of Racing
        3. 4.3. Jockeys: Distance or Pace Preference?
      6. 5. Discussion
      7. References
  11. Part 3: Favorite-Longshot Bias in the Win Market
    1. Chapter 6. The Favorite-Longshot Bias: An Overview of the Main Explanations
      1. 1. Introduction
      2. 2. Notation
      3. 3. Misestimation of Probabilities
      4. 4. Market Power by Informed Bettors
      5. 5. Preference for Risk
      6. 6. Heterogeneous Beliefs
      7. 7. Market Power by Uninformed Bookmaker
      8. 8. Limited Arbitrage
      9. 9. Simultaneous Betting by Insiders
      10. 10. Timing of Bets
        1. 10.1. Early Betting
        2. 10.2. Late Betting
      11. References
    2. Chapter 7. Examining Explanations of a Market Anomaly: Preferences or Perceptions?
      1. 1. Introduction
      2. 2. Preferences—Expected Utility Models with Linear Probabilities
      3. 3. Perceptions—The Weighting of True Probabilities
      4. 4. Perceptions—informational Effects
      5. 5. Definition of Models and Implications for Combinatoric Bets
      6. 6. Using Combinatoric Markets to Test the Models (1/2)
      7. 6. Using Combinatoric Markets to Test the Models (2/2)
        1. 6.1. Testing Conditional Independence
        2. 6.2. Relaxing Conditional Independence Further
      8. 7. Conclusion
      9. References
      10. Appendix A: Pricing of Combinatoric Bets Using Conditional Independence
      11. Appendix B: Data
    3. Chapter 8. Unifying the Favorite-Longshot Bias with Other Market Anomalies
      1. 1. Introduction
      2. 2. Biases Found in the Previous Literature
      3. 3. What Causes the Favorite-Longshot Bias at the Racetrack? (1/2)
      4. 3. What Causes the Favorite-Longshot Bias at the Racetrack? (2/2)
        1. 3.1. The Casual Bettor
        2. 3.2. The Serious or Regular Bettor
        3. 3.3. The Arbitrageur
      5. 4. Is it Risk or Information? (1/2)
      6. 4. Is it Risk or Information? (2/2)
      7. 5. Can the Model Explain the Biases in Other Markets?
      8. 6. Conclusion
      9. References
    4. 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. 1. Introduction
      2. 2. Methodology
      3. 3. Results (1/2)
      4. 3. Results (2/2)
        1. 3.1. Results for Quarterly Options on Stock Index Futures
        2. 3.2. Results for Monthly Options on Stock Index Futures
      5. 4. Conclusions
      6. References
  12. Part 4: Weak Market Efficiency
    1. Chapter 10. Efficiency of Racing, Sports, and Lottery Betting Markets
      1. 1. Introduction
      2. 2. Extent of Gambling in the U.S.
      3. 3. Racetrack Betting Markets (1/4)
      4. 3. Racetrack Betting Markets (2/4)
      5. 3. Racetrack Betting Markets (3/4)
      6. 3. Racetrack Betting Markets (4/4)
        1. 3.1. Introduction to Racetrack Betting
        2. 3.2. Win Market
        3. 3.3. Place and Show Markets
        4. 3.4. Place and Show Probabilities
        5. 3.5. Optimal Capital Growth
        6. 3.6. Implementing the System and Empirical Results
        7. 3.7. Does the System Still Provide Profits?
        8. 3.8. Exotic Markets
        9. 3.9. Cross-Track Betting
      7. 4. The Football Betting Market
      8. 5. The Basketball Betting Market
      9. 6. Lotteries
        1. 6.1. Introduction to Lotteries
        2. 6.2. Inefficiencies with Unpopular Numbers
      10. References (1/2)
      11. References (2/2)
    2. Chapter 11. Point Spread and Odds Betting: Baseball, Basketball, and American Football
      1. 1. Introduction
      2. 2. Efficiency of Odds Betting Markets
        1. 2.1. Horse Race Betting
        2. 2.2. Baseball
      3. 3. Efficiency of Point Spread Betting Markets
        1. 3.1. American Football
        2. 3.2. Basketball
      4. 4. Relationship of Point Spread and Odds Betting
        1. 4.1. Normal Distribution Result
        2. 4.2. Applications of the Normal Approximation
      5. 5. The Normal Model and Mid-Event Wagering
      6. 6. Summary
      7. References
    3. Chapter 12. Comparing Efficiency of the Over/Under-Bets on NFL and NBA Games
      1. 1. Introduction
      2. 2. The Sports Betting Market: Setting Point Spreads and Over/Unders
      3. 3. NFL and NBA Betting Market Efficiency (1/2)
      4. 3. NFL and NBA Betting Market Efficiency (2/2)
      5. 4. Conclusion
      6. References
    4. Chapter 13. Arbitrage and Risk Arbitrage in Team Jai Alai
      1. 1. Introduction
      2. 2. The Arbitrage
      3. 3. Risk Arbitrages (1/2)
      4. 3. Risk Arbitrages (2/2)
      5. 4. Final Remarks
      6. References
  13. Part 5: Semi-Strong Form Efficiency
    1. Chapter 14. Semi-Strong Form Information Efficiency in Horse Race Betting Markets
      1. 1. Introduction
      2. 2. Semi-Strong Form Efficiency in Horse Race Betting Markets: Single Variable Models (1/4)
      3. 2. Semi-Strong Form Efficiency in Horse Race Betting Markets: Single Variable Models (2/4)
      4. 2. Semi-Strong Form Efficiency in Horse Race Betting Markets: Single Variable Models (3/4)
      5. 2. Semi-Strong Form Efficiency in Horse Race Betting Markets: Single Variable Models (4/4)
        1. 2.1. Arbitrage Between Parallel Markets
        2. 2.2. Professional Predictions
        3. 2.3. Betting Volume
        4. 2.4. Post Position
        5. 2.5. Pedigree
        6. 2.6. Distance Preference
        7. 2.7. Single Variable Models: Overview
      6. 3. Semi-Strong Form Efficiency in Horse Race Betting Markets: Multiple Variable Models (1/2)
      7. 3. Semi-Strong Form Efficiency in Horse Race Betting Markets: Multiple Variable Models (2/2)
        1. 3.1. Distribution-Based Methods
        2. 3.2. Distribution-Free Methods
        3. 3.3. Multiple Variable Models: Overview
      8. 4. Semi-Strong Form Efficiency in Horse Race Betting Markets: Conclusion
      9. References
    2. Chapter 15. The Dosage Breeding Theory for Horse Racing Predictions
      1. 1. Introduction
      2. 2. The Racetrack as a Sequence of Markets
      3. 3. The Dosage Index and Performance Measures
      4. 4. Data Acquisition
      5. 5. Application of Breeding Information and Performance Measures to Refine Estimated Win Probabilities for the Kentucky Derby
      6. 6. The Kelly Betting Model
      7. 7. The Kentucky Derby, 1981–2006
      8. 8. The Preakness Stakes, 1946–2006
      9. 9. The Belmont Stakes, 1946–2006
      10. 10. Conclusions
      11. References
      12. Appendix A: Data Sources
        1. A.1. Public’s Wagering
        2. A.2. Pedigrees
        3. A.3. Chef-de-Race Listings
        4. A.4. Experimental Free Handicap Listings
        5. A.5. Results of the Kentucky Derby and Major Races Prior to the Kentucky Derby
      13. Appendix B: Kentucky Derby, Preakness, and Belmont Winners, 1946–2006 (1/2)
      14. Appendix B: Kentucky Derby, Preakness, and Belmont Winners, 1946–2006 (2/2)
    3. Chapter 16. Efficiency in Horse Race Betting Markets: The Role of Professional Tipsters
      1. 1. Introduction
      2. 2. The Model
      3. 3. Data
        1. 3.1. Tips and Rewards Rules
        2. 3.2. Public Information
        3. 3.3. Measuring Forecast Originality
      4. 4. Results
        1. 4.1. Results of Frequency Tests
        2. 4.2. Originality and Accuracy
        3. 4.3. Anti-Herding and Excess Originality
      5. 5. Conclusion
      6. References
      7. Appendix: Proof of Equation (5)
  14. Part 6: Prediction Markets
    1. Chapter 17. Index Betting for Sports and Stock Indices
      1. 1. Background
      2. 2. How Index Betting Operates
      3. 3. Setting Spreads
      4. 4. Spreads in Performance Indices
      5. 5. Advantageous Bets
      6. 6. Regulation, Taxation, and Biases in Spread Betting Markets
      7. References
      8. Appendix A
      9. Appendix B
      10. Appendix C
    2. Chapter 18. Prediction Markets: From Politics to Business (and Back)
      1. 1. Overview
      2. 2. The First Prediction Markets
      3. 3. Markets in the Lab
      4. 4. Current Uses of Prediction Markets: Business and Policy
      5. 5. Future Directions: Decision Markets
      6. 6. Potential Pitfalls
      7. 7. Conclusion
      8. References
    3. Chapter 19. Betting Exchanges: A Technological Revolution in Sports Betting
      1. 1. Introduction
      2. 2. The Operation of Betting Exchanges
      3. 3. Empirical Models and Evidence Concerning Weak-Form Information Efficiency in Betting Exchanges
      4. 4. New Evidence on the Degree of Bias in Betting Exchange Odds
      5. 5. Conclusions
      6. References
  15. Part 7: Soccer
    1. Chapter 20. Soccer Betting in Britain
      1. 1. Introduction
      2. 2. Development of Soccer Betting
      3. 3. Transactions Costs in the Fixed Odds Market
      4. 4. Early Study of Market Efficiency
      5. 5. Tipsters
      6. 6. Fundamental Analysis as an Aid to Soccer Betting
      7. 7. Technical Analysis
      8. 8. Sentiment
      9. 9. The Future of Research on Soccer Betting
      10. References
    2. Chapter 21. Efficiency of Soccer Betting Odds—Evidence from a Pan-European Electronic Market
      1. 1. Introduction
      2. 2. The Soccer Betting Market
      3. 3. Data Description
      4. 4. Efficiency Tests
        1. 4.1. Statistical Tests
        2. 4.2. Economic Tests
      5. 5. Conclusion
      6. References
  16. Part 8: Lotteries
    1. Chapter 22. How to Design a Lottery
      1. 1. Introduction
      2. 2. The Odds of Winning a (Pari-Mutuel) Lottery
      3. 3. The Expected Value Calculation
      4. 4. Higher Moments of the Prize Distribution
      5. 5. Econometric Methodology, Data, and Estimates
      6. 6. Game Design Simulations
      7. 7. Conclusion
      8. References
      9. Appendix: The Expected Value Formula
    2. Chapter 23. The Statistics of Lotteries
      1. 1. Introduction
      2. 2. Prize Structure and Winning Chances (1/2)
      3. 2. Prize Structure and Winning Chances (2/2)
      4. 3. Tests of Randomness
      5. 4. Gambler Choices (1/2)
      6. 4. Gambler Choices (2/2)
      7. References
    3. Chapter 24. U.S. Lotto Markets
      1. 1. Introduction
      2. 2. Differences Between American and European Lotteries
      3. 3. Fungibility of Lottery Revenues
      4. 4. Efficiency of Lottery Markets—Part 1
      5. 5. Efficiency of Lottery Markets—Part 2
      6. 6. Efficiency of Lottery Markets—Part 3
      7. 7. Conclusions
      8. References
    4. Subject Index (1/2)
    5. Subject Index (2/2)
    6. Author Index

Product information

  • Title: Handbook of Sports and Lottery Markets
  • Author(s): Donald B. Hausch, W.T. Ziemba, G. Constantinides, H.M Markowitz, R.C. Merton, S.C. Myers, P.A. Samuelson, W.F. Sharpe, Kenneth J. Arrow
  • Release date: August 2011
  • Publisher(s): North Holland
  • ISBN: 9780080559957