University of Oulu

Koivuranta, M. & Korhonen, M. Empir Econ (2019) 57: 2149.

Misperception explains favorite-longshot bias : evidence from the Finnish and Swedish harness horse race markets

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Author: Koivuranta, Matti1; Korhonen, Marko1
Organizations: 1Department of Economics, University of Oulu, Oulu, Finland
Format: article
Version: accepted version
Access: open
Online Access: PDF Full Text (PDF, 0.7 MB)
Persistent link:
Language: English
Published: Springer Nature, 2019
Publish Date: 2020-01-08


We use a unique data set from Finnish and Swedish horse race betting markets to explain the favorite-longshot bias. The data set includes a complete set of odds for exotic markets. We use the exotic market odds in conjunction with the win market odds and find convincing support for the misperceptions explanation of the favorite-longshot bias rather than the risk-love explanation. Furthermore, our data provide evidence of a specific type of failure to reduce compound lotteries. Namely, it seems that bettors do not assess the exotic market events as simple lotteries but instead consider the race for the first place and the race for the second place in a sequential form.

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Series: Empirical economics
ISSN: 0377-7332
ISSN-E: 1435-8921
ISSN-L: 0377-7332
Volume: 57
Issue: 6
Pages: 2149 - 2160
DOI: 10.1007/s00181-018-1538-0
Type of Publication: A1 Journal article – refereed
Field of Science: 511 Economics
512 Business and management
Copyright information: © Springer-Verlag GmbH Germany, part of Springer Nature 2018. This is a post-peer-review, pre-copyedit version of an article published in Empirical economics. The final authenticated version is available online at: