Do Bettors Categorize Bets?

Greg Durham, Montana State University, USA
Mukunthan Santhanakrishnan, Idaho State University, USA
The objective of this paper is to examine whether bettors categorize wagers on games in the unique setting of the college football betting market. Evidence from various other markets suggests that investors sort their investment alternatives into categories. However, these tests for evidence consistent with categorization are potentially confounded by the fact that assets in those markets represent the rights to multiple future cash flows, whereas tests in our market are cleaner because of certain unique features of wagers. We utilize a methodology employed by Barberis, Shleifer, and Wurgler (2005) and find that while returns of games co-move positively with returns of other similar games, underlying cash flows of these games do not co-move positively with underlying cash flows of other similar games. This evidence is consistent with the notion that bettors categorize bets based on teams’ conference affiliations.
[ to cite ]:
Greg Durham and Mukunthan Santhanakrishnan (2010) ,"Do Bettors Categorize Bets?", in NA - Advances in Consumer Research Volume 37, eds. Margaret C. Campbell, Jeff Inman, and Rik Pieters, Duluth, MN : Association for Consumer Research, Pages: 718-719 .