Tests of the efficiency of racetrack betting using bookmaker odds
Management Science
Save the best for last? The treatment of dominant predictors in financial forecasting
Expert Systems with Applications: An International Journal
High-Frequency Exchange-Rate Prediction With An Artificial Neural Network
International Journal of Intelligent Systems in Accounting and Finance Management
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We explore the extent to which the decisions of participants in a speculative market effectively account for information contained in prices and price movements. The horse race betting market is an ideal environment to explore these issues. A conditional logit model is constructed to determine winning probabilities based on bookmakers closing prices and the time-indexed movement of prices to the market close. We incorporate a technique for extracting predictors from price (odds) curves using orthogonal polynomials. The results indicate that closing prices do not fully incorporate market price information, particularly information that is less readily discernable by market participants.