Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2017/6: Profitable Robot Strategies in Pari-Mutuel Betting

Petter Bjerksund () and Gunnar Stensland ()
Additional contact information
Petter Bjerksund: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Gunnar Stensland: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: We have collected odds and results from 7 474 horse races in Norway and Sweden for a period of approximately 1.5 years. Based on the odds from the win game, we construct a profitable betting strategy for the corresponding triple game. Given a 30% track take, the existence of a profitable strategy is surprising. A robot is typically needed to identify and exploit underrated bets. We argue that the existence of heterogeneous beliefs between players in the market might form a basis for profitable betting strategies. We did expect that bigger pools (more liquidity) would remove this anomaly. That is not the case. More players, and thereby bigger pools, increases the profitability of the system.

Keywords: Horse races; low odds bias; heterogeneous beliefs

JEL-codes: L83

20 pages, April 7, 2017

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