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Original Articles

Breakage and betting market efficiency: evidence from the horse track

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Pages 601-604 | Published online: 06 Oct 2010
 

Abstract

In this research the effect of breakage—the rounding down of payoffs to winning bets—on the measured efficiency of racetrack betting markets is examined empirically. Over twenty thousand horse races are analysed and it is demonstrated that evidence of betting market inefficiency is systematically related to the expected breakage. These empirical results suggest that failure to control for breakage may bias statistical tests towards rejection of the efficiency hypothesis.

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