Stock Price Reactions to Short-Lived Public Information: The Case of Betting Odds

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

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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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    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). Finance.