Framing Effects and the Market Selection Hypothesis
26 Pages Posted: 19 Dec 2017 Last revised: 28 Feb 2018
Date Written: February 26, 2018
We collect data on 75 million GBP of tennis bets over a 6 year period to analyse whether participants in high-stakes environments recognise simple framing differences. The structure of this market means that we can place the same bet at the same time in two different ways. These two isomorphic bets are framed differently, and often priced differently. We find that bettors make frequent mistakes, choosing the worse of the two bets in 35% of cases. However, bettors who choose the inferior price earn higher returns from their bets, suggesting that their effort has been focused on fundamental information acquisition rather than bet execution. The net result is that market selection may, if anything, slightly favour those who are unable, or unwilling, to recognise framing differences.
Keywords: framing, market selection, betting
JEL Classification: D01, D81, D91, G14
Suggested Citation: Suggested Citation