ON THE EFFICIENCY OF THE MARKET FOR DOUBLE (QUINELLA) BETS AT A

FINNISH RACETRACK

Antti Kanto and Gunnar Rosenqvist

Helsinki School of Economics Swedish School of Economics
Helsinki. Finland and Business Administration,
Helsinki, Finland
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.

ABSTRACT
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

..
spnu (Cis the n u d e r ofhmsu in a mu. 2 nouclfmture of our 6cttifigsystern,cornpardwith d i t r
wmkcg. 6y Z k d a a n d ~ c his, that win &t c . k n c y is not a s s u d s i n u it is ~ . s u p p o r t z d b y
t h Finnish hta The ?&dycriterion is u&ucdfm htenni* tfic amount of m y to 6c wageredm 4
bet. G system is tutuion ahtafrmn 111 mcu at a Fhidi muh-nc.(ondfaundtoproduccPacitive
pr.Fe.

1. INTRODUCTION

Racetrack betting can be thought of as a securities market The tote ticket constitutes a
security, its price or return is determined by investors (bettors) who bid against each other.
Recently the efficiency of securities markets has been the object of extensive research
(surveys are provided e.g. by Fama, 1970. Schwert, 1983, Berglund, 1986. Thaler and
Ziemba. 1988). The topic is important because the efficiency of the financial markets directly
influences the chances for f m s to obtain "rightly" priced financing, and thus accordingly has
an effect on the efficiency of the whole economy and social welfare. Admittedly, the market
for bets at the racetrack does not perhaps have this type of direct influence on the efficiency
of the total economy. However, horse race betting markets do provide unique and interesting
opportunities of research. The importance of this area of research lies in the possibilities (i) to
obtain information about how securities markets function and (i) to investigate how people
make decisions under uncertainty and risk. As noted e.g. by Snyder (1978). Ali (1979). Asch.
Makiel and Quandt (1982) and Hausch. Ziemba and Rubinstein (1981). the race track shares
many of the characteristics of the archetypal securities market. e.g. in listed common stocks.
In both cases future earnings are not known with certainty, it is easy to enter the market. there
is a large number of participants, and extensive information is available, including past data,
professional advice. and information about the activities of other participants. Thus it is
natural to apply the concept of an efficient market. Furthermore, as has been pointed out by
 486 A. KANTO AND G. ROSENQVIST

the above-mentioned authors and others, the racetrack is a particularly interesting case since it
is essentially a more elementary markeL without several of the dynamic features which serve
to make analysis of the stock market rather more complex. The tote ticket is a highly-
stadardized form of security, and the bettors (investors) act in a quasi-experimental (but
nevertheless natural) situation.

Recent research into the efficiency of horse racing betting markets has established the
efficiency of the market for win bets, despite the so-called long shot bias (Hoerl and Fallin.
1974. Asch, Malkiel and Quandt, 1982, Snyder, 1978, and Ziemba and Hausch, 1987, chap.
3). Building on this evidence Hausch. Ziernba and Rubinstein (1981). Ziernba and Hausch
(1987). and Hausch and Ziemba (1985) devised a technical system for exploiting
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

inefficiencies in place and show betting. This system - the so-called Dr. Z system - utilizes
the formulas developed by Handle (1973) for calculating from given win probabilities the
probabilities of different outcomes. The principle of these formulas can be described as
follows: Assume xiis the probability that horse i wins, then the probability that i is fist and j
is second is

and the probability that i is fist, j second and k third is

a;ITjn,
(1 - IT, )(1- IT; - ITj )

Given that the win market is efficient, good estimates of the ai:sare obtained from the odds
determined by the public in the win betting. The formulas (1) and (2) then provide
"objective" odds for each possible place and show outcome. Comparing these objective odds
with the empirically-observed odds provides a test of efficiency. Hausch, Ziemba and
Rubinstein (1981), Ziemba and Hausch (1987) and Hausch and Ziemba (1985) also utilize a
capital growth model to determine how much should be wagered when inefficiencies arise,
and demonstrate significant profits.

The purpose of this paper is to explore the existence of weak inefficiencies of this type at
racetracks in Finland. However, with Finnish data the market for win bets can hardly be taken
as efficient. This is because (i) there is no empirical evidence of this from Finland, and (ii)
the win pool is generally very small in Finland. Typically the win pool for one race is about
5-10% of that for so-called double betting, the most popular type of wager on races in
Finland. Hence, we have chosen to look at double betting. To win a double bet you have to,
without specifying the order, pick the first two horses. Thus, our double bet is identical to the
North American quinella, or the dual forecast in Great Britain. Because the Dr. Z system is
based on the win odds, which in Finland are probably unreliable, we develop an alternative,
which we call the Dr. Kaystem.

The basic idea of our approach is that, if there is a natural ranking order among the horses,
the odds for the (5) possible pairs in the double betting can not vary freely. More F-ecisely.
we assume that the probabilities of the possible outcomes in double betting should obey
 EFFICIENCY OF THE MARKET AT A FINNISH RACETRACK 487

formula (1). In other words, if there are k horses in a race, the probabilities of the (4)
different outcomes should be determined by k parameters rr,. i = I , ....k. with the obvious
restriction Z n i = 1. This gives an opportunity to fit to the empirical (i)
-1-dimensional space
of odds for the double bets a (k-1)-dimensional space of theoretical probabilities, and to
detect pairs of horses which are underbet by the public. In other words we reduce the (:) -1-
dimensional space of empirical odds to a (k-l)-dimensional space in order to detect
"favorable" bets. Following Hausch, Ziemba and Rubinstein (1981). Ziemba and Hausch
(1987). and Hausch and Ziemba (1985) we utilize the Kelly criterion (Breiman.1961) for
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.

determining the optimal wagers. The system is applied on data from Teivo Racetrack at
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

Tampere and found to produce positive profits.

Section 2 describes the "institutional" conditions in Finland. The model is presented in

Section 3 and Sections 4 and 5 contain empirical evidence. Section 6 contains a concluding
discussion, and some technical details of the system are given in an Appendix.

2. HORSE RACING IN FINLAND

In Finland horse races with betting are arranged on 19 major racetracks and 25 smaller tracks.
In 1985 these tracks arranged 669 races with a total of 6403 runners. AU Finnish racetracks
are 1000 meters long. There are no thoroughbred races in Finland, nearly all races are harness
races for trotters.The only exceptions, which are rare, are "monte races", i.e. trotters with
saddle. The race distances vary between 1600 and 3200 rn (1 mile to 2 miles), but
occasionally even longer races are arranged. About three quarters of the races include
handicaps, according to the horses' personal best times or the amcant of money they have
earned.

In Finnish horse races there are six types of bets to be made; win. place, double, triple. V4
and V5,which are described below:

Bet No. of horses to be chosen You win when

Win 1 Your selection wins

Place 1 Your selection is first, second or third
Double 2 Your selections are first and second
irrespective of the order
Triple 3 Your selections are first, second and
third, in the correct order
v4 4x 1 Your selections win four particular races
v5 5x1 Your selections win five particular races
 488 A. KANTO AND G . ROSENQVIST

Win, place and double betting is arranged in all races with four or more runners. Triple
betting is arranged on major tracks usually once in a raceday. Triple betting began in 1987.
hence experience with it is very limited. The V4 accumulator is usually arranged once a
raceday, V5 betting occurs weekly at one of the major tracks and you have to m&e your bets
no later than one or two days before the race. The most popular type of betting is the double.
In 1985 the total sum of all double bets in Finland was 439 million FIM (about 100 million
USD). which is nearly 10 times the sums of the corresponding win and place pools.

The smallest stake to be made is 5 FIM (=1.25 USD) for win, place, and double bets, 2 FIM
for triples, 1 FIM for V4 and 0.50 FIM for V5.The breakage equals 0.50 FIM.The track
payback is Q 4 . 7 9 in win, place, double and triple betting, Qd .63 in V4 and Q=0.55 in V5.
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

Off-track betting is not allowed in Finland, except in the case of V5 which is arranged
nationwide by a state-owned betting office.

3. A BE'ITING MODEL

3.1. Finding profitable double bets

Let xij (i+j) be a random variable corresponding to the number of bets (calculated in 5 FIM
tokens) made on the pair (ij) and x= (k12...., x ~ - ~be, the
~ ) vector of lenght k(k-1)/2, of a l l
bets, where k equals the number of horses in the race in question. We assume that each pair
(ij) has a probability xi, to finish fmt and second, in either order, with Z Z x i j =I. The
i<j
players lay their bets by comparing the parimutual odds with their subjective estimates of zi,.
If the market is efficient, then these subjective estimates should all be equal. However, in our
view it would be unreasonable to require an efficient market to have Xij proportional
to 7 ~ " for each pair (ij). Some reasonable stochastic variation should be allowed even within
an e&cient market. These considerations lead us to formulate a stochastic model for x. A
simple possibility is to choose a rnultinomial model for x with probabilities q j and Z X xij =
i<j
n, where n is the total number of bets made. The multinomial model is an approximation
since the assumption of independent tokens does not hold in practice. It is, however,
commonly used for discrete data and a reasonable starring point.

By Harville's formulas

(3)

where x i is the probability that horse i wins.

 EFFICIENCY OF THE MARKET AT A FINNISH RACETRACK 489

The likelihood function is then

and0 I z i S 1. The model has kparameters z i of

which k-1 are independent. The x i :s can be estimated by maximizing the likelihood
function; see the Appendix for mathematical details.
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

Let pi be the estimate of 7Ci obtained by maximizing the likelihood function above. Estimated
probabilities for each pair can now be calculated as

.._ pipi +pipi

p1J- l-pi I-,,.
J

Let Oij be the observed odds of pair (ij). i.e. the odds determined by the public,

Qi<j
Oij = -
Xij

where Q is the track payback. The expected return of pair (ij) equals PijOij-1 and it is
profitable in the theory to wager on this pair if
pijoij>1.

3.2. The amount to bet

Assume that (i) the bets made do not affect the odds and (ii) the sum wagered is continuous,
i.e. fractions of tokens can be wagered. Let wo be the initial wealth. i.e. the amount of money
available and w 1 be the wealth after the race. According to the Kelly criterion (Breiman,
1960 and 1961. Thorp, 1971) we assume that our utility function is logarithmic, i.e. that the
utility of wealth w1 is log(w1). Our aim is to maximize the expected utility E(log(w1)).

Let wi' be the amount of the wager made on pair (ij). Further, oij is the odds of pair (ij) and
Pij is d e estimated winning probability. If pijoij < 1, the estimated expected return of a bet
placed on the pair (ij) is negative and thus the optimal bet equals zero. Thus we only consider
pairs for which pijoij>l. Then the optimal amount wij is that which maximizes

which implies (Ziemba and Hausch. 1987, chap. 5 )

 490 A. KANTO AND G. ROSENQVIST

(4)
W" =
1J
0 othenvise.

The editors pointed out that formula (4) could be generalized by accounting for (a) one's
effect on the odds, and (b) betting on several pairs in the same race. However, the equations
soon become complicated. With the purpose of demonstrating an inefficiency we use
equation (4) as an approximation. Also, in any case it is important that the model is simple
enough to allow the calculations to be done in a short time.
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

3.3. Applying the procedure in practice

To sum up, practical application of our betting system at the track amounts to the following.

1. Feed the computer with the data required. This constitutes a considerable practical problem
because the number of bets for all pairs are needed. Ideally the data to be utilized should be as
final as possible, but in practice some time has to be reserved for data inputting. calculations
and wagering. Ziemba and Hausch (1987) give evidence that profits can be made by using
odds from two minutes before start. As yet our system has not been put to work in practice at
the track so we lack experience of it in this respect.

2 . Maximize the log likelihood function in order to get win probability estimates pi, i=l, ...,k

and the corresponding probabilities pij= ?+- PiPj .

-pi 1-Pj

3. If pijoij > 1 wager the amount wo ["I:;-'

-
Effective operation of the system requires that the data entering can be done in the last 2 or 3
minutes of wagering. It is possible that this will require either some kind of simplification of
the system or some kind of hi-tech implementation of the data inputting. One possible
simplification is to use data e.g. only for the two top ranked horses. A further simplification is
to compare, for each of the other horses, its odds with the favorite with its odds with the
second favorite. This procedure, which can even be done by eyeballing the tote board, may
reveal some undervalued bets.

The perfect solution of the data inputting problem would of course be to connect ones own
micro computer to the organizer's computer. As this probably is not allowed at present, other
solutions must be looked for. One possibility is to devide the work between a few persons,
each typing down part of the required data base, and then to merge the sub-data bases
 EFFICIENCY OF THE MARKET AT A FINNISH RACETRACK 49 1

utilizing e.g. a small local net. Optical reading of the tote board or a monitor is another
speculative possibility.

4. AN ILLUSTRATIVE EXAMPLE

To illustrate. consider Race 10 on the card at Killerjmi, the racetrack of Jyvlskyla, on 26th
January, 1986. This race was chosen because it is one where the fist author actually rode one
of the horses - the number 2. Laku.
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

am-
?"-

Table 4.1. The program for Race 10 at Killerjhi. Jan. 26, 1986.

The total wagers were 1690 for win, 2085 for place, and 52880 for double. Table 4.2 gives
the observed win odds and the odds obtained from win probabilities estimated from double
play. (we follow the European way of announcing odds, i.e. the odds gives Lhe amount of
money payed for every mark bet. Thus, e.g. odds of 3.5 would be given as 5-2 in North
America).
 492 A. KANTO AND G. ROSENQVIST

Musta-Hilu, horse No. 9 is the favourite both in win betting and double play. In addition both
odds are similar. For other horses, the estimated and observed odds differ considerably. e.g.
in the case of horse No. 3. This may be an indication of some kind of inefficiency.

Horse observed estimated Horse observed estimated

odds odds odds odds

1 26.7 34.9 8 5.9 6.8

2 53.4 58.1 9 2.7 2.5
3 53.4 12.2 10 5.1 6.3
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.

4 29.6 19.0 11 66.7 31.5

Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

5 17.8 22.5 12 19.0 32.2

6 9.8 13.2 13 7.6 6.8
I 20.5 18.0 14 44.5 103.6

Table 4.2. Observed win betting odds and winning odds estimated from double play betting.

The observed double odds a~ Dresented in Table 4.3. and the odds estimated from the
estimated winning probabilities are in Table 4.4.

1 2 3 4 5 6 I 8 9 10 11 12 13
2 334.2
3 163.8 397.8
4 225.8 225.8 88.8
5 288.0 642.6 114.4 245.7
6 154.7 491.4 73.9 90.8 128.5
7 363.2 596.7 75.9 203.7 208.8 136.9
8 177.7 363.2 54.9 108.4 134.7 73.2 70.2
9 74.5 130.5 18.0 30.1 35.6 20.6 24.6 6.7
10 117.6 185.6 68.4 61.3 60.9 39.5 104.4 34.0 7.4
11 835.4 278.5 185.6 363.2 417.7 198.9 397.8 189.8 50.9 117.6
12 759.5 1392.4 278.5 348.1 835.4 103.7 596.7 167.1 43.5 89.8 298.3
13 174.0 464.1 51.5 141.6 112.8 73.2 65.1 24.9 7.8 22.8 126.5 149.1
14 8355.0 - 1044.3 596.7 1193.5 464.1 1392.4 1670.9 134.7 491.4 835.4 1193.5 397.8

Table 4.3. Observed double odds. A hyphen (-1 means that the pair is not played at all.

As one can see, there are considerable differences in these odds. For example, the observed
double odds for the pair (1.2) is only 334.2, whereas the estimated odds is 1263.3. This
shows, that the pair (1.2) is overplayed. (From experience outside the scope of this study, we
believe that the pair (1.2) very often is overplayed).
 EFFICIENCY OF THE MARKET AT A FINNISH RACETRACK 493

1 2 3 4 5 6 7 8 9 10 11 12 13
2 1263.3
3 259.5 434.2
4 407.5 681.9 140.1
5 484.9 811.4 166.7 261.8
6 279.1 468.1 96.2 151.0 179.7
7 385.0 644.1 132.3 207.8 241.3 142.7
8 140.8 235.5 48.4 76.0 90.4 52.2 71.8
9 46.2 77.3 15.9 25.0 29.7 17.2 23.6 8.7
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

10 128.6 215.1 44.2 69.4 82.6 47.7 65.6 24.0 7.9

11 681.0 1139.6 234.1 367.6 437.4 2.52.3 347.3 127.0 41.7 116.0
12 696.0 1164.7 239.2 375.7 441.0 257.9 354.9 129.8 42.6 118.6 627.9
13 140.7 235.5 48.4 76.0 90.4 52.2 71.8 16.3 8.7 24.0 127.0 129.8
14 2256.6 3776.0 775.5 1218.0 1449.3 836.0 1150.6 420.7 138.1 384.3 2035.5 2080.4 420.6

Table 4.4. Double odds obtained from estimated winning probabilities.

The method described earlier gives us the following betting system, where the amount is
expressed as a proportion of the capital at hand.

Pair amount odds Pair amount odds

1 9 0.00371 74.5 5 12 0.00057 835.4

1 14 0.0 0023 8354.9 6 8 0.00 149 73.2
2 8 0.00060 363.2 6 13 0.00149 73.2
2 9 0.00257 130.4 7 10 0.00248 104.3
2 13 0.00120 464.1 7 12 0.00055 596.7
2 14 0.00009 8354.9 8 10 0.00357 34.0
3 10 0.00328 68.4 8 11 0.00096 189.8
3 14 0.00006 1044.3 8 12 0.000 10 167.0
4 8 0.00118 108.4 8 14 0.00128 1670.9
4 13 0.00335 141.5 10 14 0.00002 491.4
5 8 0.00132 134.7

Table 4.5. Dr. K system bets.

There are some further odds in Table 4.3 which are greater than those in 4.4, e.g. those for the
pairs (1.1 1) and (2.12). but the difference is so small that it does not cover the track take, i.e.
for these pairs the estimated expected value pi'oij is smaller than one. The total sum wagered
equals .03010, which represents about 3% of &e capital at hand. This does not seem to be a
dangerous way to play.
 494 A. KANTO AND G. ROSENQVIST

The wagers in Table 4.5 are obtained using equation (4) on each pair one by one. Most of the
bets are small and placed on pairs with high odds. One of the editors pointed out that
diversification would probably lead to larger bets.

The favorite, No. 9, won with No. 1 second. With odds 74.5 the bet returned .27639 for a
profit of .24630, or about one quarter of the base capital.

This example was. in fact, the first one we studied. Its results encouraged us to investigate
further.
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

5. A LARGER STUDY

We have applied our method on ex post data from Teivo. in Tampere, the second largest
racetrack in Finland. Our data consisted of 111 races over 11 days in July, August and
September 1987. The development of our capital (see Figure 5.1) ends in a 46.5% increase,
or about 3.5% per race day.

0 10 20 30 40 50 60 70 80 SO 100 110 120

1

Race number
Figure 5.1. Wealth level by race.
 EFFICIENCY OF THE MARKET AT A FINNISH RACETRACK 495

The overall-return is built up by a few successful bets. whereas most of the bets end in a
slight loss. These single losses are. however, typically so small that they are covered by wins.
In an attempt to assess the reliability of the results we performed a significance test in the
manner of Hausch. Ziemba and Rubinstein (1981, pp. 1450-1451). We calculate the
probability of achieving a wealth level at least as high as 1.465 under a random betting
model. Let A be the probability of winning a bet and Xi be the payoff,

1+ w if the bet is won,

xi =
0 otherwise.
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

It follows that E(Xi)= n(l+w), Var(Xi) = ( 1 + ~ ) 2 ~ ( 1and- ~the

) null hypothesis is that
n (l+w) = 0.79, the track payback. The probability of interest ("significance level") is

where n = 111 and Q is the cumulative distribution function of a standardized normal

variable. From the data n is estimated as 0.081 and further 0.79 is, according to the null
hypothesis, inserted for n (l+w). This gives 0.0038 as the probability of obtaining by random
betting a wealth level of at least 1.465 in the 111 races.

6. CONCLUSIONS

Some of the smaller Finnish racetracks have no toteboards. At these tracks, one bets with no
information about the empirical odds. Even when there is a toteboard, only a few, usually 6-
12, of the lowest double odds are displayed. Higher odds are available only from special
monitors and, thus, it should not be surprising if some inefficiencies exist at Finnish
racetracks, and especially so in double play.

This paper is the first empirical investigation into the efficiency of betting markets at Finnish
racetracks. We have presented a simple model for detecting technical inefficiencies in the
market for double bets. A novel feature of our approach is that no reliance is made on the
assumption of an efficient win market, an assumption that would not seem to be appropriate
for Finnish racing. In the data we have gathered up to now, consisting of 111 races at Teivo,
our system provided significant profits. Admittedly, however, one could want further
empirical evidence. Our future plans are to test this model on further data and to explore other
possible inefficiencies at Finnish racetracks. We will also have to consider the practical
implementability of the system. However, the present study offers a promise of possible
positive expected returns. It remains to refute or sustain this hypothesis with further data.

A multinomial model was considered. Besides maximizing the multinomial likelihood,

estimates of the win probabilities were also obtained by alternative methods (Poisson, normal,
minimum-chi*). However, these experiments produced win probabilities which were similar
to those obtained using the multinomial approach, and hence only the latter are given here.
 496 A. KANTO AND G. ROSENQVIST

APPENDIX. The maximization algorithm used

The purpose is to find the maximum likelihood estimates of ai using our model. The
logarithm of the likelihood function is

where Ic = (Ic 1,....Ic k). ZlFi = 1, and c is a Constant.

by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

A version of the steepest descent algorithm is utilized to maximize 4 ~ )Let

. po=(pp ,...,pi )
.
be an initial estimate of K . A new estimate p l of ~cis obtained by correcting pp i=O, ..., k-1,
in the direction

k-1
with a step size D, say, and letting pi = 1- X pf . Thus
i=l

k-1
p i = 1- z p:
i=l

The step size D has been determined in the following way (see e.g. Marquardt, 1963):
1) Set D = 1.

2) If 4pl) > 4po) and 0 5 p: 5 1 the step is complete.

Otherwise set D = DllO and recalculate pl.
The iteration is stopped when D c 6 , where 6 is some predetermined quantity. We have
used 6 = 10-20.

Because one of the components of ff ,say ff k,is dependent of the others, we have

*h i
= -1, i = 1,.... k-1

and thus
 EFFICIENCY OF THE MARKET AT A FINNISH RACETRACK 491

=4 - 4. i = 1,..., k-1.

Similarly
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.

After some tedious but straightforward algebra the frst and second derivatives of the log
Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

likelihood are found to be

Acknowledgements. We are grateful to Suomen Hippos for financial support and to the
editors for comments improving our presentation.

REFERENCES

Ali, M.M. (1979): Some Evidence of the Efficiency of a Speculative Market, )Zconometrica,
47,387-392.

Asch. P., Makiel, B.G. and Quandt. R.E. (1982): Racetrack Betting and Informed Behavior,
. .
Journal of Financial Economics, 10, 187-194.

Berglund, T. (1986): Anomalies in Stock Returns on a Thin Securitv Market,Publications of

the Swedish School of Economics and Business Administration, nr 37, Helsingfors.

Breiman, L. (1960): Investment Policies for Expanding Businesses Optimal in Long-Run

Sense, Naval R e m u 0' c ' s O u r w,7,647-651. Reprinted in Ziemba, W.T. and
Vickson, R.G. (eds.): Stochastic Optimization Models in Finance, Academic Press, London,
1975.
 498 A. KANTO AND G . ROSENQVIST

Breiman. L. (1961): Optimal Gambling Systems for Favorable Games, h c e e d i n.s of h e

s and P r o w , Neyman. J. (ed.).
University of California Press, Berkeley and Los Angeles.

Harville, D.A. (1973): Assigning Probabilities to the Outcomes of Multi-Entry Competitions,

. . . .
lavrnal of the Am-sucal A s s o w ,68.312-316.

Hausch, D.B. and Ziemba. W.T. (1985): Transaction Costs, Extent of Inefficiencies, Entries
and Multiple Wagers in a Racetrack Betting Model, w e n t Science. 3 1, 38 1-394.

Hausch, D.B.. Ziemba, W.T. and Rubinstein, M. (1981): Efficiency of the Market for
m,
by NANYANG TECHNOLOGICAL UNIVERSITY on 05/11/16. For personal use only.

Racetrack Betting, -men1 27. 1435-1452.

Efficiency of Racetrack Betting Markets Downloaded from www.worldscientific.com

Hoerl, A.E. and Fallin. H.K. (1974): Reliability of Subjective Evaluations in a High Incentive
Situation, Journal of the Royal S 'utical Society. Ser. 4, 137,227-230.

Marquardt, D.W. (1963): An Algorithm for Least-Squares Estimation of Nonlinear

Parameters, Journal of the Societv for Industrial and A w t h e m a tics. 11. 431-441.

Schwert, G.W. (1983): Size and Stock Returns, and Other Empirical Regularities, Journal of
. .
mancial Economics, 12,3-12.

Snyder, W.W. (1978): Horse Racing: Testing the Efficient Markets Model, The Journal of
Finance, 33, 1109-1 118.

"haler, R. and Ziemba, W.T. (1988): Parimutual Betting Markets: Racetracks and Lotteries.
3 h Journal of Eco nom ic PersDectives, 2. Spring, 161-174.
Thorp, E.O. (197 1): Portfolio Choice and The Kelly Criterion, Business and Economics
Statistics Section, Proceedings of the American Statistical Association, 215-224. Reprinted in
Ziemba, W.T. and Vickson, R.G. (eds.): Stochastic Optimization Models in Finance,
Academic Press, London, 1975.

Ziemba, W.T. and Hausch, D.B. (1987): Beat the Racetrack , Harcourt Brace William
Morrow, New York.