The Wisdom of Large and Small Crowds: Evidence from Repeated Natural Experiments in Sports Betting

25 Pages Posted: 18 Jan 2017

See all articles by Alasdair Brown

Alasdair Brown

University of East Anglia (UEA)

Fuyu Yang

University of East Anglia (UEA) - School of Economic and Social Studies

Date Written: January 13, 2017

Abstract

Prediction markets have proved excellent tools for forecasting, outperforming experts and polls in many settings. But do larger markets, with wider participation, perform better than smaller markets? In this paper we analyse a series of repeated natural experiments in sports betting. The Queen's Club Tennis Championships are held every year, but every other year the Championships clash with a major soccer tournament. We find that tennis betting prices become significantly less informative when participation rates are adversely affected by the clashing soccer tournament. Larger markets perform better, in part, because of the higher returns they offer for informed trading.

Keywords: prediction markets, forecasting, sports betting, natural experiment

JEL Classification: G02, G12, G14

Suggested Citation

Brown, Alasdair and Yang, Fuyu, The Wisdom of Large and Small Crowds: Evidence from Repeated Natural Experiments in Sports Betting (January 13, 2017). Available at SSRN: https://ssrn.com/abstract=2898762 or http://dx.doi.org/10.2139/ssrn.2898762

Alasdair Brown (Contact Author)

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Fuyu Yang

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

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