Location

Caesars Palace, Las Vegas Florentine III

Start Date

28-5-2013 10:30 AM

End Date

28-5-2013 12:00 PM

Abstract

We analyze 1.6 million binary bets on financial markets totaling $600 million in stakes, placed by 21,000 bettors at a large Internet betting site. The data set is unusually large and complete, plus has one additional important advantage: we can obtain objective independent estimates of the ex ante probability of winning each bet, using data from financial markets. This allows us to distinguish bettor profit due to superior prediction of financial events from bettor profit due to exploiting ex ante favorable odds situations. We focus on the degree or type of skill possessed by bettors (if any), and the amount of rationality and risk intelligence demonstrated in exploiting that skill.

Disciplines

Economics | Gaming and Casino Operations Management | Mental and Social Health | Psychology | Public Affairs, Public Policy and Public Administration | Sociology | Statistics and Probability | Substance Abuse and Addiction

Comments

Moderator: Douglas Walker

Session 1-2-F Risk, Rationality, and Investment

File: 24 PowerPoint slides

Attached file: Paper

 
May 28th, 10:30 AM May 28th, 12:00 PM

Session 1-2-F: Rationality and Risk Intelligence in Binary Betting

Caesars Palace, Las Vegas Florentine III

We analyze 1.6 million binary bets on financial markets totaling $600 million in stakes, placed by 21,000 bettors at a large Internet betting site. The data set is unusually large and complete, plus has one additional important advantage: we can obtain objective independent estimates of the ex ante probability of winning each bet, using data from financial markets. This allows us to distinguish bettor profit due to superior prediction of financial events from bettor profit due to exploiting ex ante favorable odds situations. We focus on the degree or type of skill possessed by bettors (if any), and the amount of rationality and risk intelligence demonstrated in exploiting that skill.