Finding what causes pricing anomalies is an important step towards improving market efficiency. The favourite-longshot bias is one of the longest-standing pricing anomalies in state-contingent claims markets. However, existing models are unable to capture its full complexity. We develop a...

This paper explores the use of the anchoring and adjustment heuristic by decision makers in a financial market; in particular, the degree to which horserace bettors anchor their probability judgments on the advantage afforded by a horse‟s barrier-position. The results suggest that under...

We discover mispricing in an apparently transparent market — the European soccer betting market. Efficiency differences between countries are accounted for by variations in league competitiveness. We conclude that barriers to efficiency (e.g., risk evaluation problems) may remain in...