English, Article edition: Testing the Efficiency of Markets in the 2002 World Cup Ricard Gil; Steven D. Levitt

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Bookmark: http://trove.nla.gov.au/version/1994389
Physical Description
  • article
Language
  • English

Edition details

Title
  • Testing the Efficiency of Markets in the 2002 World Cup
Author
  • Ricard Gil
  • Steven D. Levitt
Physical Description
  • article
Notes
  • Trading data from the gambling market for the 2002 World Cup provide a unique window through which to test theories of market efficiency. This market provides many of the benefits of a laboratory experiment, but with much higher stakes, experienced participants, and a naturally-occurring environment. The primary drawback of the data is the relatively small number of trades. The evidence concerning market efficiency is mixed. Although markets respond strongly to goals being scored, there is some evidence that prices continue to trend higher for 10-15 minutes after a goal. We also observe systematically negative returns for bets on the pre-game favorite, consistent with the biases seen in wagering on other sports. We document the endogenous emergence of market makers. These market makers are involved in a large share of trades. Increasing from two active market makers to five or more market makers does not appear to improve the functioning of the market. On average, the market makers earn slightly negative returns, implying that other traders are able to identify situations in which market makers are setting inefficient prices.
  • RePEc:buc:jpredm:v:1:y:2007:i:3:p:255-270
Language
  • English
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