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The liquidity advantage of the quote-driven market: Evidence from the betting industry


Flepp, Raphael; Nüesch, Stephan; Franck, E (2017). The liquidity advantage of the quote-driven market: Evidence from the betting industry. The Quarterly review of economics and finance, 64(2017):306-317.

Abstract

Even though betting exchanges are considered to be the superior business model in the betting industry due to less operational risk and lower information costs, bookmakers continue to be successful.We explain the puzzling coexistence of these two market structures with the advantage of guaranteed liquidity in the bookmaker market. Using matched panel data of over 1.8 million bookmaker and bettingexchange odds for 17,410 soccer matches played worldwide, we find that the bookmaker offers higherodds and bettor returns than the betting exchange when liquidity at the betting exchange is low.

Abstract

Even though betting exchanges are considered to be the superior business model in the betting industry due to less operational risk and lower information costs, bookmakers continue to be successful.We explain the puzzling coexistence of these two market structures with the advantage of guaranteed liquidity in the bookmaker market. Using matched panel data of over 1.8 million bookmaker and bettingexchange odds for 17,410 soccer matches played worldwide, we find that the bookmaker offers higherodds and bettor returns than the betting exchange when liquidity at the betting exchange is low.

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3 citations in Web of Science®
4 citations in Scopus®
1 citation in Microsoft Academic
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Language:English
Date:2017
Deposited On:19 Dec 2017 13:59
Last Modified:01 May 2020 00:01
Publisher:Elsevier
ISSN:1062-9769
OA Status:Green
Publisher DOI:https://doi.org/10.1016/j.qref.2016.07.016
Related URLs:http://www.sciencedirect.com/science/article/pii/S1062976916300631 (Publisher)
Other Identification Number:merlin-id:15500

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