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Price Setting in Online Betting Markets: Evidence from the Eurovision Betting / HUASHENG XIANG

Swansea University Author: HUASHENG XIANG

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DOI (Published version): 10.23889/SUthesis.59513

Abstract

This thesis investigates the price-setting behaviour of bookmakers in the online betting market. Specifically, I study betting price dispersion, frequency, and magnitude of price changes, as well as bookmaker overround by employing betting prices for the Eurovision Song Contest 2017. Previous studie...

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Published: Swansea 2021
Institution: Swansea University
Degree level: Doctoral
Degree name: Ph.D
Supervisor: Talavera, Oleksandr ; Tian, Mo
URI: https://cronfa.swan.ac.uk/Record/cronfa59513
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first_indexed 2022-03-07T12:05:15Z
last_indexed 2022-03-08T04:28:40Z
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spelling 2022-03-07T12:11:20.4882317 v2 59513 2022-03-07 Price Setting in Online Betting Markets: Evidence from the Eurovision Betting 9480cc97ee87a2302179dfa4f995595d HUASHENG XIANG HUASHENG XIANG true false 2022-03-07 This thesis investigates the price-setting behaviour of bookmakers in the online betting market. Specifically, I study betting price dispersion, frequency, and magnitude of price changes, as well as bookmaker overround by employing betting prices for the Eurovision Song Contest 2017. Previous studies suggest that online betting markets are nearly frictionless and efficient, which implies that betting price dispersion should be negligible or at least diminishing over time, since time reveals the fundamental value of each bet. However, our empirical evidence shows that the extent of betting price dispersion is large and persistent. Even after accounting for the heterogeneity of bookmakers, the price dispersion survives. Crucially, betting prices are considerably sticky. For instance, the average duration of price spells is about 1.5 hours during the grand-final live, where the length of the grand-final is only 3.75 hours. By incorporating more than 600,000 related tweets, I find that the number of tweets is strongly positively associated with the frequency and magnitude of betting price changes. This shows that changes in betting prices reflect the information flow. Yet, little is known about the betting market friction; thus, more studies are needed. Finally, this thesis empirically examines the dynamic of bookmaker overround, which is helpful in understanding betting price-setting behaviour at the bookmaker level. I report a significantly positive correlation between the size of the overround and the degree of information uncertainty. Moreover, bookmakers tend to reduce the overround in the later progress of the contest, even after controlling the changes in the number of surviving participating teams. This implies that, when the outcome is more produced, bookmakers will attempt to increase their sales by reducing the overround. Consistent with the findings in sport betting markets, our results show that bookmakers adjust prices in a defensive manner by manipulating the size of the premium charged on each bet. For instance, the bookmakers increase their overrounds while the lower-ranked team is catching up with the higher-ranked team. Overall, this thesis provides a comprehensive analysis of bookmaker pricing at the good level and bookmaker level, respectively. E-Thesis Swansea 12 2 2021 2021-02-12 10.23889/SUthesis.59513 Due to Embargo and/or Third Party Copyright restrictions, this thesis is not available via this service. COLLEGE NANME COLLEGE CODE Swansea University Talavera, Oleksandr ; Tian, Mo Doctoral Ph.D 2022-03-07T12:11:20.4882317 2022-03-07T12:02:11.9813130 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance HUASHENG XIANG 1
title Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
spellingShingle Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
HUASHENG XIANG
title_short Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
title_full Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
title_fullStr Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
title_full_unstemmed Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
title_sort Price Setting in Online Betting Markets: Evidence from the Eurovision Betting
author_id_str_mv 9480cc97ee87a2302179dfa4f995595d
author_id_fullname_str_mv 9480cc97ee87a2302179dfa4f995595d_***_HUASHENG XIANG
author HUASHENG XIANG
author2 HUASHENG XIANG
format E-Thesis
publishDate 2021
institution Swansea University
doi_str_mv 10.23889/SUthesis.59513
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 0
active_str 0
description This thesis investigates the price-setting behaviour of bookmakers in the online betting market. Specifically, I study betting price dispersion, frequency, and magnitude of price changes, as well as bookmaker overround by employing betting prices for the Eurovision Song Contest 2017. Previous studies suggest that online betting markets are nearly frictionless and efficient, which implies that betting price dispersion should be negligible or at least diminishing over time, since time reveals the fundamental value of each bet. However, our empirical evidence shows that the extent of betting price dispersion is large and persistent. Even after accounting for the heterogeneity of bookmakers, the price dispersion survives. Crucially, betting prices are considerably sticky. For instance, the average duration of price spells is about 1.5 hours during the grand-final live, where the length of the grand-final is only 3.75 hours. By incorporating more than 600,000 related tweets, I find that the number of tweets is strongly positively associated with the frequency and magnitude of betting price changes. This shows that changes in betting prices reflect the information flow. Yet, little is known about the betting market friction; thus, more studies are needed. Finally, this thesis empirically examines the dynamic of bookmaker overround, which is helpful in understanding betting price-setting behaviour at the bookmaker level. I report a significantly positive correlation between the size of the overround and the degree of information uncertainty. Moreover, bookmakers tend to reduce the overround in the later progress of the contest, even after controlling the changes in the number of surviving participating teams. This implies that, when the outcome is more produced, bookmakers will attempt to increase their sales by reducing the overround. Consistent with the findings in sport betting markets, our results show that bookmakers adjust prices in a defensive manner by manipulating the size of the premium charged on each bet. For instance, the bookmakers increase their overrounds while the lower-ranked team is catching up with the higher-ranked team. Overall, this thesis provides a comprehensive analysis of bookmaker pricing at the good level and bookmaker level, respectively.
published_date 2021-02-12T04:16:53Z
_version_ 1763754129185832960
score 11.037581

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