Fair Bet Research Articles

Multivariate risk attitude: a comparison of alternative approaches in sustainability policies

AbstractRisk aversion has an unambiguous meaning in the univariate context: But, what does it mean to be risk averse in the multivariate case? Concave Risk Aversion (CRA) and Multivariate Risk Aversion (MRA) are relevant extensions of the risk aversion concept used in the univariate case to the multivariate case, corresponding to concave and ultramodular utility classes, respectively. Although CRA and MRA can coexist, they are dramatically different in some ways, leading to opposite preferences under some circumstances, as in the face of irreversible risks. We introduce the notions of purely concave and purely multivariate risk aversion, related to disjoint utility classes. We apply the purely risk aversion notions to the field of sustainability, where catastrophic and irreversible outcomes can be faced, in order to highlight and compare the consequences of the two approaches on sustainability policies. In this respect, we provide three main results. First, the kind of risk aversion determines the pursued goal. Second, the principle of “rejecting any fair bet” is not always preserved. Third, sustainability policies induced by different risk aversions, if repeated, produce final states in which mean-variance criterion holds.

A comment on Paul, Weinbach, and Wilson’s (2004) “Efficient markets, fair bets, and profitability in NBA totals 1995-96 to 2001-02”

This paper revisits Paul et al. (2004) using a more recent data set to test for inefficiencies in the totals market for NBA games. Using data from the 1995-96 to 2001-02 seasons, Paul et al. (2004) found the market as a whole to be efficient, but that this was not the case for bets on the highest of point totals. Using data from the 2012-13 to 2018-19 seasons reveals a market that is more efficient than that of their earlier work, as the null hypothesis of a fair bet is not rejected for the higher totals. However, winning percentages in excess of 52.4 % were found further in the upper tail of the distribution of points totals relative to the earlier period.

Mediterranean Gluten-Free Diet: Is It a Fair Bet for the Treatment of Gluten-Related Disorders?

Gluten-free diet (GFD) is the current treatment of gluten-related disorders. It eliminates wheat, barley, and rye, while the exclusion of oats is still under debate. GFD is based on a combination of naturally gluten-free foods and gluten-free substitutes of cereal-based foods. Although effective as treatment of gluten-related disorders, today there is concern about how to improve GFD's nutritional quality, to make it not only gluten-free, but also healthy. The “Mediterranean diet” (MedD) refers to the dietary pattern and eating habits typical of populations living in the Mediterranean basin, which have been associated with low prevalence of several diet-related pathologies. Here we present a narrative review of the current knowledge about GFD and MedD, their characteristics and central food components. Based on the Mediterranean diet pyramid developed by the Italian pediatric society, we propose a combination between the MedD and the GFD, an attractive alternative to reach a gluten-free state that at the same time is healthy, with a clear benefit to those who practice it.

Choose Privacy Week 2018: Big Data is Watching You

Five months ago, when the members of ALA’s Privacy Subcommittee met to decide on this year’s [2018] “Choose Privacy Week” (CPW) theme, it’s a fair bet to say that only a tiny percentage of the general public had ever heard of Cambridge Analytica, Aleksandr Kogan, the SCL Group, or of a fairly obscure app called “thisisyourdigitallife.”And yet, there were warnings about Cambridge Analytica’s program as early as December 2015, when the London Guardian first reported on this data-collection program and its integration with Facebook as part of Ted Cruz’s 2016 bid for the US presidency. Michael Zimmer, a University of Wisconsin-Milwaukee associate professor and a member of ALA’s Privacy Subcommittee, was quoted by the Guardian about why the use of such data was highly problematic. “It’s one thing for a marketer to try to predict if people like Coke or Pepsi,” said Zimmer, “but it’s another thing for them to predict things that are much more central to our identity, and what’s more personal in how I interact with the world in terms of social and cultural issues?”In the wake of Mark Zuckerberg’s Congressional testimony last week [in April 2018] and the related explosion of public interest in how online personal data is collected, stored, shared, used, and sometimes misused, this year’s CPW theme—“Big Data is Watching You”—could not be more perfectly timed.

Evaluating The Use of Realtime Data in Forecasting Output Levels and Recessionary Events in the USA

SummaryThe paper proposes a modelling framework and evaluation procedure to judge the usefulness of realtime data sets incorporating past data vintages and survey expectations in forecasting. The analysis is based on ‘metamodels’ obtained by using model averaging techniques and judged by various statistical and economic criteria, including a novel criterion based on a fair bet. Analysing US output data over 1968, quarter 4–2015, quarter 1, we find that both elements of the realtime data are useful with their contributions varying over time. Revisions data are particularly valuable for point and density forecasts of growth but survey expectations are important in forecasting rare recessionary events.

A new test of the risk-reward heuristic

AbstractRisk and reward are negatively correlated in a wide variety of environments, and in many cases this trade off approximates a fair bet. Pleskac and Hertwig (2014) recently proposed that people have internalized this relationship and use it as the basis for probability estimation and subsequent choice under conditions of uncertainty. Specifically, they showed that risky options with high-value outcomes are inferred to have lower probability than options offering a less valuable reward. We report two experiments that test a simple corollary of this idea. In both studies, participants estimated the magnitude of prizes offered by lotteries with known win-probabilities. The relationship between estimates and probabilities followed the power relationship predicted by the risk-reward heuristic, albeit with a tendency to overestimate outcome magnitude. In addition, people’s estimates predicted their willingness to take the gamble. Our results provide further evidence that people have internalized the ecological relationship between risk and reward in financial lotteries, and we suggest that this relationship exerts a wide-ranging influence on decision-making.

Quantum gambling based on Nash-equilibrium

The problem of establishing a fair bet between spatially separated gambler and casino can only be solved in the classical regime by relying on a trusted third party. By combining Nash-equilibrium theory with quantum game theory, we show that a secure, remote, two-party game can be played using a quantum gambling machine which has no classical counterpart. Specifically, by modifying the Nash-equilibrium point we can construct games with arbitrary amount of bias, including a game that is demonstrably fair to both parties. We also report a proof-of-principle experimental demonstration using linear optics.

Forecasting global recessions in a GVAR model of actual and expected output

We compare a Global VAR model of actual and expected outputs with alternative models for assessing the roles of cross-country interdependencies and confidence in forecasting. Forecast performances are judged on point and density forecasts of growth, on probability forecasts of the occurrence of national and global recessionary events, and, through a novel ‘fair bet’ exercise, on decision-making using probability forecasts. We find that multi-country and survey data are required in order to capture the influence of global interactions and expectations in forecasts fully. We argue that output predictions should avoid simple point forecasts and focus on densities and events that are relevant to decision-makers.

ARE BEHAVIORAL BIASES CONSISTENT ACROSS THE ATLANTIC?: THE OVER/UNDER MARKET FOR EUROPEAN SOCCER

Tests of the totals (Over/Under) market are performed for 22 European Soccer Leagues to determine if the behavioral biases found in North American sports betting markets are present in European Football (Soccer) betting markets. Even though European fans passionately follow a low-scoring sport, bettors/fans in this market still appear to prefer the over to the under. Simple betting strategies based on betting the over lose more than twice as much money as a simple strategy of betting the under and returns are found to be statistically different from a fair bet. In addition, when the over is the longshot, a favorite-longshot bias is found such that losses on the over are extremely high. When the under is the longshot, however, losses are nearly equal between overs and unders. This presents the possibility multiple behavioral biases may exist in the same financial market, with the presence of one possibly masking the other.

Fair Tontine Annuity

An annuity is an arrangement in which an individual makes a one-time payment (the premium) to an insurer in exchange for a lifetime payment stream. Ideally, the expected present value of the payment stream matches the premium, making it a fair annuity. In practice, the payment stream is smaller than that, providing the insurer with a profit margin. This paper proposes a fair tontine annuity (FTA), an arrangement that provides a lifetime payment stream whose expected present value matches that of a fair annuity. The FTA is based on a fair tontine. In a fair tontine, a group of members contribute to a pool, and each time a member dies, her contribution is divided among surviving members. The distribution to surviving members is made in unequal portions, according to a plan that provides each member with a fair bet, meaning a bet whose expected gain is zero. We show that, under broad conditions, such a plan exists and is readily constructed. Members may be of any age and gender and may contribute any desired amount. New members may join at any time, allowing the fair tontine to operate in perpetuity.The FTA is formed by adding a few enhancements to the fair tontine. The result is something that closely resembles an annuity. The member makes a one-time contribution and receives payments on a fixed schedule (e.g., monthly) that last for his lifetime. The value of each payment is a random amount, with an expected value that is identical to the payment that would be made by a fair annuity. Thus, the FTA offers a higher expected payout than an insurer-provided annuity, since no profit is being extracted. Simulations show that the FTA outperforms a typical insurer-provided FTA not just on the average, but for virtually every member who lives more than just a few years, even with a pool as small as a few hundred members. Since the FTA imposes no risk on the provider, it can be offered by vendors other than insurers, such as mutual fund houses, retail brokers, etc.

Financial Options and the Scandal of Banca Popolare Italiana (BPI): An Overnight Business Case

Written immediately after the financial scandal involving the entire Governance of Banca Popolare Italiana (BPI) in 2006, this paper tries to answer the most frequently asked question by small, individual investors: are financial options a fair bet for anyone? Restated in a more general form, this question better reflects the deepest concerns raised by the BPI scandal: is it even conceivable that options' value can be manipulated by bankers in favor of few institutional investors? What is the asymmetry in the option pricing algorithm that would allow an unequal distribution of risk, and consequently of pay-offs, among investors? Are financial options a transparent and credible investment choice for a small investor?

Silica template synthesis of ordered mesoporous carbon thick films with 35-nm pore size from mesophase pitch solution

Under a lower carbonization temperature and with a mesophase pitch solution as the carbon precursor, ordered mesoporous carbon thick films with 35-nm pore size have been synthesized using SiO2 spheres as the template. The pore size of the mesoporous carbon thus fabricated was the smallest one ever reported using silica templates. XRD and Raman spectroscopy suggest a microstructure of carbon with low crystallinity. SEM and TEM patterns show a discernible morphology of an ordered hexagonal close-packing of the mesopores interconnected via holes of 6 nm in diameter. A fair BET surface area of 502 m2/g and a total pore volume of 0.861 cm3/g, along with the characteristic pore structure and hysteresis loop, are identified.

Bettor Misperceptions in the NBA

Systematic bettor misperceptions are found in the NBA point spread gambling market for the seasons of 1995-1996 to 2001-2002. Evidence of the overbetting of favorites is found, with a strategy of betting big underdogs rejecting the null of a fair bet. Betting big home underdogs not only rejects a fair bet but is also shown to reject the null of no profitability. In addition, betting against winning streaks, as first suggested in the “hot-hand” article of Camerer and later tested by Brown and Sauer, is also shown to be profitable.

Market efficiency and NCAA college basketball gambling

The betting market for NCAA college basketball is examined from the 1996–97 season through 2003–04. In the overall sample, market efficiency cannot be rejected. For big favorites, specifically those favorites of 20 or more, a simple strategy of betting the underdog in these games is shown to reject the null hypothesis of a fair bet since the underdog wins more than implied by efficiency. This bias appears to be the same as in other sports. The home-team bias in college basketball is shown to be the opposite of the other sports, however, since big favorites win more often than implied by efficiency. Potential reasons for this bias such as NCAA tournament incentives and uniformity of playing conditions are discussed.

Fair bets and profitability in college football gambling

Efficient markets in college football are tested over a 25-year period, 1976–2000. the market in general is found to be efficient, but betting on underdogs of more than 28 points violates a fair bet. The strategy of betting home underdogs reveals stronger results. Home underdogs of more than seven points are found to reject the null hypotheses of a fair bet over the last 10 years of the sample, 1991–2000. Home underdogs of more than 28 points are found to reject the null of no profitability during the same time frame.

Efficient markets, fair bets, and profitability in NBA totals 1995–96 to 2001–02

The market for NBA totals was examined from 1995–96 to 2001–02. For the sample as a whole, a fair bet could not be rejected, leading to the conclusion of an efficient market. For the highest of the totals, however, the null hypothesis of a fair bet is rejected in the same manner as professional football in that overs are over bet. Although, winning percentages on betting the under above certain totals were found to be above 52.4%, the percentage needed to overcome the vigorish of the sportsbook, statistically significant violations of the null hypothesis of no profitability were not found. In addition, tests of betting with or against streaks in the spirit of the “hot hand” were not found to be profitable. It appears that bettors prefer the over to the under, but informed bettors will bet the under to the point where it is profitable for them to do so, which is enough to allow for the null hypothesis of a fair bet to be rejected, but not enough for profitability to be found.

Value of information in the Polya urn process

A series of games based on the Polya urn process is considered. The objective is to develop an understanding of the concept of the value of information in connection to these games. It is rigorously shown that information may have negative, zero or positive incremental value to player for calculating a fair bet. It is also shown that additional information will, in many cases, not effect the betting strategy of the player.

Market Efficiency and a Profitable Betting Rule

This article presents empirical tests of efficient markets on the professional football market for totals from 1979 through 2000. The forecast errors in the totals market were found to be skewed, so a test of a fair bet on National Football League totals was performed using a log likelihood ratio test as suggested by Evan and Noble. The under on the total is a winning proposition more than 50% of the time, but a fair bet cannot be rejected. A betting rule that looks at totals in the high end of the totals distribution and takes a contrarian strategy of betting unders for games that are 7,6, or 5 points above the mean is shown to violate a fair bet. Rejection of no profitability, when incorporating the take of the sportsbook, is also rejected for the highest of the totals.

THE FASB'S ACCOMPLISHMENTS TO DATE: ONE PARTICIPANT'S VIEWS

PROLOGUE When the editor of this journal wrote me in mid-1997, he invited me, as the Financial Accounting Standards Board's (FASB) most recent former chairman, to write a retrospective of the Board's activities to date. 25th anniversary of the FASB in 1998 just happens to coincide with the 25th anniversary of Academy of Accounting Historians so it seemed logical to publish an overview of the FASB's history at the same time that Academy itself was celebrating. I told the editor that such an effort was probably beyond my capabilities (I am not an historian!) and available time. So I agreed to take on a more modest project of reviewing the FASB's activities during my ten and one-half years as chairman (January 1987June 1997). Surely that would not be too hard a job. All I had to do was organize the few boxes of materials I had moved from my FASB office to University of Georgia. I am not a compulsive saver by nature, but I had tried to keep some of the stuff from my FASB experiences. Because I had a vague plan to organize that material in order to help recall my experiences many years hence, the chance to write the article was a good excuse to get organized earlier. I assumed that the article would virtually write itself through merely assembling bits and pieces of various documents from my files. I now have a much greater appreciation for the work of historians as my good intentions failed miserably. I have only just begun getting organized after a year away from the FASB. demands of teaching, speaking, other writing, professional committee work, and an occasional (too rare) golf game have made it clear that organizing my personal archives will not be done soon. Hence, Plan C. I was asked to participate in a conference in June 1998 at New York University that recognized the FASB's anniversary. My assigned topic was The Board's Accomplishments. This was a lot more doable than the earlier two ideas, and, in fact, I did it! This paper, thus, began with my outline for that conference and it develops the points I made there in more detail. It is not a history of the FASB or even of the 40% or so of its life that I spent there. But it is a start upon which others and I can build in years to come. I greatly appreciate the editor's patience with me and I hope that readers will consider this modest effort to be useful. I would be very interested in having discussions with accounting historians who can suggest ways on which this beginning can be built. INTRODUCTION Before getting into specifics, I want to cite two relatively recent comments by influential parties about the current state of accounting standards. First, Deputy Secretary of the Treasury Lawrence Summers had the following to say in an op-ed piece published in the Financial Times (London) on March 11, 1998: If one were writing a history of the American capital market, it is a fair bet that the single most important innovation shaping that market was the idea of generally accepted accounting principles. That statement expresses very broad support for the accounting requirements developed in the United States over many years. But Securities and Exchange Commission Chairman Arthur Levitt was more specifically supportive of the FASB's efforts to establish and improve generally accepted accounting principles (GAAP) when he said in a speech to the Conference Board on October 8, 1997: Financial Accounting Standards Board has filled the role of impartial standard-setter admirably for a quarter century. As you know so well, these same years have witnessed an astonishing evolution and expansion in the techniques of raising capital in our markets. In a climate where change has become a constant, the FASB has consistently sought to ensure the accuracy of financial information, protecting the basic rights of the investor and strengthening public confidence in our markets. It is comforting to have such distinguished individuals acknowledge the overall success of accounting standard setting in the United States. …

State lotteries and externalities to their participants

The degree of participation in state lotteries can either increase or decrease expected returns. It is theoretically possible for unfair bets to become more than fair as participation in lotteries changes. In addition, the purchase of every combination of numbers can be more than a fair bet and such a purchase may increase the expected return to other lottery players.