Paper Title
Analysis of Skewness Preference for Horse Track Gamblers in Hong Kong and Japan
Abstract
Empirical studies of parimutuel wagering markets almost universally find that bettors systematically overbet
longshots and underbet favorites. This favorite-longshot bias has been interpreted as evidence of the risk preference of horse
track gamblers. More recently the skewness of returns has been explicitly included into the representative bettor's utility
function in addition to the variance and the mean of betting returns. The anomalous finding of risk preference in previous
studies is consistent with the omission of the skewness of betting returns from the utility function. In this research we
thoroughly re-examine the mean-variance-skewness utility model using horse track betting data from Hong Kong and Japan
where there is no favorite-longshot bias. Using robust statistical tools, we find evidence in support of risk aversion and
skewness preference when the favorites are sufficiently overweighted.
Keywords - Betting biases, Mean-variance-skewness utility model, Skewness preference, Horse track gambling