Do Beliefs Reflect Information Reliability? Evidence From Betting Markets
86 Pages Posted: 6 Apr 2016 Last revised: 27 Mar 2020
Date Written: March 25, 2020
Beliefs should be affected more strongly by reliable signals. We test this notion, using beliefs inferred from bookmakers’ odds for tennis matches, exploiting exogenous variation in information reliability related to whether a tennis match is played in a long or short format. We find that bookmakers’ beliefs do not fully reflect the reliability of available signals. This insensitivity to information reliability is costly to bookmakers. Results from a placebo test using women’s matches, where all matches are played in the same format, support our conclusions. Insensitivity to information reliability affects beliefs in other sports-betting markets, as well as financial markets.
Keywords: Field Experiments, Bayes Rule, Decision Heuristics
JEL Classification: D8, G1
Suggested Citation: Suggested Citation