Do Bookmakers Possess Superior Skills to Bettors in Predicting Outcomes?

Michael A. Smith , David Paton , Leighton Vaughan Williams

In this paper we test the hypothesis that bookmakers display superior skills to bettors in predicting the outcome of sporting events by using matched data from traditional bookmaking and person-to-person exchanges. Employing a conditional logistic regression model on horse racing data from the UK we find that, in high liquidity betting markets, betting exchange odds have more predictive value than the corresponding bookmaker odds. To control for potential spillovers between the two markets, we repeat the analysis for cases where prices diverge significantly. Once again, exchange odds yield more valuable information concerning race outcomes than the bookmaker equivalents.

Mots clés: D82; G12; G14; betting exchanges; market efficiency; prediction

Domaines: Économie et finance quantitative [q-fin]

Michael A. Smith, David Paton, Leighton Vaughan Williams. Do Bookmakers Possess Superior Skills to Bettors in Predicting Outcomes?. Journal of Economic Behavior and Organization, 2009, 71 (2), pp.539. ⟨10.1016/j.jebo.2009.03.016⟩. ⟨hal-00684229⟩