ABSTRACT
It is shown that, at British racecourses, bookmakers offer more/less favourable odds on favourites/outsiders compared to the Tote system of betting. This would seem to suggest semi-strong inefficiency between these parallel markets. However, the degree of inefficiency between the odds in these twomarkets falls as the market operates and the structures of the two markets suggest that it is not efficient for the odds offeredby the twomarkets to converge exactly. Though systematic differences exist in the odds offered by the two markets, the variation in the differences in Tote and bookmaker odds is great. This variation is likely to hinder adjustment between the two markets. It is noted that the differences between the two markets are compatible with profit maximisation by bookmakers and efficient behaviour by bettors.
