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Kazuki Okamoto and Mototsugu Fukushige
''Favourite–longshot biases in a pari-mutuel system without cross arbitrage''
( 2022, Vol. 42 No.1 )
The Japan Racing Association supplies bracket quinellas and quinellas. Repdigit-type bracket quinellas and their corresponding quinellas lead to the same winning probabilities, with both types of quinellas operating separately under a pari-mutuel system. However, the actual odds for these quinellas are different. Empirical testing suggests that there is no possibility for arbitrage between these tickets and that the repdigit-type bracket quinella exhibits a stronger favorite–longshot bias than the quinella. This implies that the favorite–longshot bias is not arbitraged across the separately operated pari-mutuel system and is always stronger for bracket-type quinellas than quinellas.
Keywords: favourite–longshot bias; horse racing; quinella; bracket quinella
JEL: G1 - General Financial Markets
D1 - Household Behavior: General
Manuscript Received : Jul 19 2021 Manuscript Accepted : Feb 20 2022

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