Scandinavian Working Papers in Business Administration

Working Papers,
Örebro University, School of Business

No 2007:12: Testing Market Efficiency in a Fixed Odds Betting Market

Robin Jakobsson () and Niklas Karlsson ()
Additional contact information
Robin Jakobsson: Department of Business, Economics, Statistics and Informatics, Postal: Örebro University, Department of Business, Economics, Statistics and Informatics, SE - 701 82 ÖREBRO, Sweden
Niklas Karlsson: Department of Business, Economics, Statistics and Informatics, Postal: Örebro University, Department of Business, Economics, Statistics and Informatics, SE - 701 82 ÖREBRO, Sweden

Abstract: This paper tests the hypothesis of market efficiency for the fixed odds betting market of Swedish trotting head-to-head matches. The hypothesis is carried out by a Wald test within a logistic regression model. Data support rejection of semi-strong efficiency at the 5 percent level of significance, while the weak form efficiency cannot be rejected. Moreover, evaluation of the simple strategy to bet on those horses where, conditional on the estimated model, the expected profit is positive results in a profit of 7.8 percent per bet.

Keywords: EMH; betting; trotting; market; efficiency; logit; Wald

JEL-codes: G14

13 pages, December 13, 2007

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