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Pari-mutuel betting markets: racetracks and lotteries revisited

Ziemba, William T. (2023) Pari-mutuel betting markets: racetracks and lotteries revisited. Annual Review of Financial Economics, 15. 641 - 662. ISSN 1941-1367

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Identification Number: 10.1146/annurev-financial-053122-021925

Abstract

This survey discusses the state of the art in research in racetrack and lottery investment markets. Market efficiency and the pricing of various wagers are studied along with new developments since the Thaler & Ziemba (1988) review. The weak form inefficient market pricing approach using stochastic programming optimization models changed racetrack betting from handicapping to a financial market allowing professional syndicates to operate as hedge funds. Topics discussed include arbitrage and risk arbitrage, syndicates, betting exchange rebates, behavioral biases, and fundamental and mispricing information in racetrack and lottery markets. Similar models can be used to successfully trade stock market anomalies. Supplemental Materials are included online.

Item Type: Article
Official URL: https://www.annualreviews.org/journal/financial
Additional Information: © 2023 The Author(s)
Divisions: Systemic Risk Centre
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C79 - Other
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
Date Deposited: 23 Nov 2023 12:39
Last Modified: 23 Feb 2024 22:36
URI: http://eprints.lse.ac.uk/id/eprint/120846

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