- Title
- Market efficiency and continuous information arrival: evidence from prediction markets
- Creator
- Docherty, Paul; Easton, Steve
- Relation
- Applied Economics Vol. 44, Issue 19, p. 2461-2471
- Publisher Link
- http://dx.doi.org/10.1080/00036846.2011.564154
- Publisher
- Routledge
- Resource Type
- journal article
- Date
- 2012
- Description
- Two regularities in financial economics are that prices underreact to news events and that they display short term momentum. This article tests for the presence of these regularities in prediction markets offered by the betting exchange Betfair on the 2008 Ryder Cup Golf Competition. Betfair offered in play prediction markets on the individual match play pairings and on the Cup result, with trading being virtually continuous in all markets. Modelled probabilities of the Cup result were updated continuously using trades in the individual match play pairings. These probabilities were then compared with the probabilities of the Cup result implied by odds in that market. The odds in the market for the Cup result underreact to both good and bad news that is provided by changes in the odds in the markets for the individual pairings. Further, these modelled probabilities Granger cause changes in the probabilities of the Cup result implied by odds in the market on that outcome. In addition, economically and statistically significant evidence of momentum is found in the odds in the market on the Cup result.
- Subject
- market efficiency; prediction markets; information arrival
- Identifier
- http://hdl.handle.net/1959.13/1051658
- Identifier
- uon:15303
- Identifier
- ISSN:0003-6846
- Rights
- This is an electronic version of an article published in Applied Economics, Volume 44, Number 9, pp. 2461-2471. Applied Economics is available online at: http://www.tandfonline.com/openurl?genre=article&issn=0003-6846&volume=44&issue=9&spage=2461
- Language
- eng
- Full Text
- Reviewed
- Hits: 926
- Visitors: 1338
- Downloads: 440
| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | ATTACHMENT02 | Author final version | 307 KB | Adobe Acrobat PDF | View Details Download |