search query: @indexterm Insider trading / total: 155
reference: 79 / 155
Author: | Hyun Song Shin |
Title: | Optimal betting odds against insider traders |
Journal: | Economic Journal
1991 : SEP, VOL. 101:408, p. 1179-1185 |
Index terms: | INSIDER TRADING INFORMATION GAMBLING INDUSTRY UNITED KINGDOM |
Language: | eng |
Abstract: | A situation is discussed where a bookmaker at the race track is facing a group of gamblers, some of whom have insider information on the outcome of a race. The bookmaker cannot distinguish gamblers with insider information and those without, but has some idea of their proportion. What odds should the bookmaker offer? When this situation is modelled as a game between the bookmaker and the gamblers, the normalized betting odds diverge systematically from the true winning probabilities of the horses. The description of betting in this paper is modelled on the betting system in the UK. The analysis is applicable to any situation where informed price setters face uninformed traders. |
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