Publication: When the league table lies: Does outcome bias lead to informationally inefficient markets?
When the league table lies: Does outcome bias lead to informationally inefficient markets?
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Flepp, R., Merz, O., & Franck, E. (2024). When the league table lies: Does outcome bias lead to informationally inefficient markets? Economic Inquiry, 62(1), 414–429. https://doi.org/10.1111/ecin.13163
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We study whether outcome bias persists in markets with actors who are financially incentivized to make optimal decisions. We test whether inherently noisy match outcomes from European football are correctly incorporated into prices from a betting exchange market. We find that market prices overestimate (underestimate) the winning probability of teams that previously overperformed (underperformed) in terms of match outcomes compared to their performance based on “expected goals”. This pattern is mirrored in negative (positive) betting
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Flepp, R., Merz, O., & Franck, E. (2024). When the league table lies: Does outcome bias lead to informationally inefficient markets? Economic Inquiry, 62(1), 414–429. https://doi.org/10.1111/ecin.13163
