Sonic Thunder vs Brian the Snail – Fast-Sounding Racehorse Names and Prediction Accuracy in Betting Exchange Markets

26 Pages Posted: 23 Oct 2019

See all articles by Oliver Merz

Oliver Merz

University of Zurich - Department of Business Administration (IBW)

Raphael Flepp

University of Zurich - Department of Business Administration (IBW)

Egon P. Franck

University of Zurich - Department of Business Administration (IBW)

Date Written: October 14, 2019

Abstract

This paper examines the influence of objectively irrelevant information on prediction accuracy in horse-racing betting exchange markets. In horse racing, the name of a horse does not depend on the horse’s performance and is thus uninformative. We investigate the impact of fast-sounding horse names on prediction market price accuracy and betting returns. 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 the prices in betting exchange markets are not efficient, as prices become distorted by incorporating the 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 of all other horses.

Keywords: Market efficiency, Sports forecasting, Prediction markets, Betting industry, Horse Racing

JEL Classification: D40, G40, C53, L83

Suggested Citation

Merz, Oliver and Flepp, Raphael and Franck, Egon P., Sonic Thunder vs Brian the Snail – Fast-Sounding Racehorse Names and Prediction Accuracy in Betting Exchange Markets (October 14, 2019). Available at SSRN: https://ssrn.com/abstract=3469641 or http://dx.doi.org/10.2139/ssrn.3469641

Oliver Merz (Contact Author)

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Raphael Flepp

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Egon P. Franck

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich 8032
Switzerland
+41 1 634 28 45 (Phone)

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