A Case Study on the Informational Efficiency of Markets: The Market for Horse Racing in Australia
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This paper describes a study of the informational efficiency of the thoroughbred horse racing market in Australia. It is based on the theory of stock market efficiency which explains the process by which information becomes reflected in share prices. In this paper, the theory is applied to the thoroughbred horse racing market to determine the predictive accuracy of alternative informative sources. The results obtained from the study are consistent with the underlying theory:
(i) aggregated information (as reflected in a consensus of opinions) is a more accurate prediction of success than less information (as reflected in individual opinions), and;
(ii) the most recent information (as reflected in race-time betting odds, known as starting prices) has greater predictive ability than less recent information (as reflected in an earlier consensus of opinions).
The study examines predictive accuracy in a gambling context, but does not consider the profitability of alternative prediction processes.
KeywordsStock Market Accurate Prediction Predictive Ability Predictive Accuracy Share Price
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