Favourite-Longshot Bias

Authors: Hurley, William; McDonough, Lawrence

Source: The Journal of Gambling Business and Economics, Volume 1, Number 1, February 2007 , pp. 3-12(10)

In the study of wagering markets, it is generally the case that the objective probabilities of various contestants (horses, teams, etc.) winning do not match those implied by the betting. More often than not favourites are underbet and longshots overbet, although some studies have found the reverse. We offer an explanation in the case where there is imperfect competition among book-makers and heterogeneous expectations among bettors.



Authors: Deschamps, Bruno; Gergaud, Olivier

Source: The Journal of Prediction Markets, Volume 1, Number 1, February 2007 , pp. 61-73(13)

We analyze the efficiency of English football betting markets between 2002 and 2006. We find evidence of a positive favourite-longshot bias for both home odds and away odds. Draw odds are instead characterized by a negative longshot bias. We also identify a draw bias in the sense that betting at draw odds yields a higher return than betting at home or away odds. Finally, we investigate betting strategies that exploit the variance of odds between bookmakers.