ABSTRACT
There is a large body of evidence which suggests that the combined judgements of decision-makers within financial markets effectively incorporate information concerning historical prices into current prices, to the extent that abnormal returns cannot be made if buy and sell decisions are made on the basis of historical prices. The horserace betting market is one form of financial market that has received considerable scrutiny in this regard. An important reason for this focus is that ‘wagering markets are especially simple financial markets, in which the pricing problem is reduced. As a result, wagering markets can provide a clear view of pricing issues which are complicated elsewhere’ (Sauer, 1998, p. 2021).
