Abstract

This paper investigates the impact of the market microstructure on market efficiency based on data from the betting industry. Similar to financial mar- kets, betting markets are characterized by the coexistence of a quote-driven market structure (bookmakers) and an order-driven market structure (betting exchanges). We show that the quote-driven market exhibits lower market effi- ciency than the order-driven market. Taking advantage of the inefficient odds available at the quote-driven market leads to above-average, and in some cases even positive bettor returns.

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