Stock Price Reactions to Short-Lived Public Information

The Case of Betting Odds

F.A. Palomino, L.D.R. Renneboog, C. Zhang

Research output: Working paperDiscussion paperOther research output

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Abstract

Stock markets and betting markets co-exist for professional soccer clubs listed on the London Stock Exchange.For each firm, two pieces of information are released to the stock market on a weekly basis from August to June: experts expectations about game outcomes through the betting odds, and the game outcomes.Stock markets process the news about games results fast.By contrast, there is no evidence of abnormal returns on the trading days following release of betting information.Moreover, due to the absence of a market reaction to betting odds and the fact that these odds are very good predictors of game outcomes, these odds contain unpriced information and can be used to predict short-run stock returns.Our findings are consistent with theories of under-reaction to public information and the impact of the level of salience of information on the speed at which financial markets process information.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages31
Volume2005-62
Publication statusPublished - 2005

Publication series

NameCentER Discussion Paper
Volume2005-62

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Betting
Stock price reaction
Public information
Stock market
Market process
Soccer
Market reaction
Financial markets
News
Stock returns
Abnormal returns
Underreaction
London Stock Exchange
Betting markets
Predictors
Short-run
Clubs

Cite this

Palomino, F. A., Renneboog, L. D. R., & Zhang, C. (2005). Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds. (CentER Discussion Paper; Vol. 2005-62). Tilburg: Finance.
Palomino, F.A. ; Renneboog, L.D.R. ; Zhang, C. / Stock Price Reactions to Short-Lived Public Information : The Case of Betting Odds. Tilburg : Finance, 2005. (CentER Discussion Paper).
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abstract = "Stock markets and betting markets co-exist for professional soccer clubs listed on the London Stock Exchange.For each firm, two pieces of information are released to the stock market on a weekly basis from August to June: experts expectations about game outcomes through the betting odds, and the game outcomes.Stock markets process the news about games results fast.By contrast, there is no evidence of abnormal returns on the trading days following release of betting information.Moreover, due to the absence of a market reaction to betting odds and the fact that these odds are very good predictors of game outcomes, these odds contain unpriced information and can be used to predict short-run stock returns.Our findings are consistent with theories of under-reaction to public information and the impact of the level of salience of information on the speed at which financial markets process information.",
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Palomino, FA, Renneboog, LDR & Zhang, C 2005 'Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds' CentER Discussion Paper, vol. 2005-62, Finance, Tilburg.

Stock Price Reactions to Short-Lived Public Information : The Case of Betting Odds. / Palomino, F.A.; Renneboog, L.D.R.; Zhang, C.

Tilburg : Finance, 2005. (CentER Discussion Paper; Vol. 2005-62).

Research output: Working paperDiscussion paperOther research output

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T1 - Stock Price Reactions to Short-Lived Public Information

T2 - The Case of Betting Odds

AU - Palomino, F.A.

AU - Renneboog, L.D.R.

AU - Zhang, C.

N1 - Pagination: 31

PY - 2005

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N2 - Stock markets and betting markets co-exist for professional soccer clubs listed on the London Stock Exchange.For each firm, two pieces of information are released to the stock market on a weekly basis from August to June: experts expectations about game outcomes through the betting odds, and the game outcomes.Stock markets process the news about games results fast.By contrast, there is no evidence of abnormal returns on the trading days following release of betting information.Moreover, due to the absence of a market reaction to betting odds and the fact that these odds are very good predictors of game outcomes, these odds contain unpriced information and can be used to predict short-run stock returns.Our findings are consistent with theories of under-reaction to public information and the impact of the level of salience of information on the speed at which financial markets process information.

AB - Stock markets and betting markets co-exist for professional soccer clubs listed on the London Stock Exchange.For each firm, two pieces of information are released to the stock market on a weekly basis from August to June: experts expectations about game outcomes through the betting odds, and the game outcomes.Stock markets process the news about games results fast.By contrast, there is no evidence of abnormal returns on the trading days following release of betting information.Moreover, due to the absence of a market reaction to betting odds and the fact that these odds are very good predictors of game outcomes, these odds contain unpriced information and can be used to predict short-run stock returns.Our findings are consistent with theories of under-reaction to public information and the impact of the level of salience of information on the speed at which financial markets process information.

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BT - Stock Price Reactions to Short-Lived Public Information

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CY - Tilburg

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Palomino FA, Renneboog LDR, Zhang C. Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds. Tilburg: Finance. 2005. (CentER Discussion Paper).