Sonic Thunder vs Brian the Snail – Are people affected by uninformative racehorse names?

Abstract

This paper examines whether individuals’ decision making is affected by fast-sounding horse names in a betting exchange market environment. In horse racing, the name of a horse does not depend on the horse’s performance and is thus uninformative. If positive affect towards fast-sounding horse names is present, we expect less accurate prices (winning probabilities) and lower returns due to the increased demand for these bets. Using over 3 million horse bets, we find evidence that the winning probabilities of bets on horses with fast-sounding names are overstated, which impairs the prediction accuracy of such bets. This finding implies that prices in betting exchange markets are not efficient, as they become distorted by incorporating affective, misleading information from a horse’s fast-sounding name. This bias translates into significantly lower betting returns for horses classified as fast-sounding compared to the returns for all other horses.

Keywords: Affect heuristic, Decision making, Market efficiency, Betting industry, Horse Racing

JEL Classification: D40, G40, G41, L83