Efficient Market Dynamics: Unraveling Informational Efficiency in UK Horse Racing Betting Markets Through Betfair's Time Series Analysis
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Abstract
Using Betfair's time series data, an analysis of the United Kingdom (UK) horse racing market reveals an interesting paradox: a market with short tails, rapidly decaying autocorrelations, and no long-term memory. There seems to be a remarkably high level of informational efficiency in betting exchange returns, in contrast to financial assets that are characterized by heavy tails and volatility clustering. The generalized Gaussian unconditional distribution with a light tail points to a market where knowledge is quickly assimilated and reflected in prices. Thisis further supported by the extremely quick fading of autocorrelations and the absence of gain- loss asymmetry. Therefore, in addition to measuring long-range memory, the Hurst exponent also shows mean reversion, a sign that markets respond quickly to fresh information.
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