Efficiency of Betting Markets and Rationality of Players: Evidence from the French 6/49 Lotto
Journal of Applied Statistics, Vol. 34, No. 6, 2007
Posted: 16 Nov 2011
Date Written: January 15, 2007
We analyze the existence of preferred numbers on the French Lotto market and prove that this market is not strongly efficient in the sense of Thaler & Ziemba (1988). The preference for low numbers is investigated by means of stochastic dominance tests. The specific features of the French Lotto game allow us to build a simple estimate of the probability distribution of numbers actually played. The results are compared with the (highly time-consuming) maximum likelihood estimator used by Farrell et al. (2000). It is shown that the two methods give very close results. Our conclusions stress the perspectives of this study in various domains.
Keywords: lotto, pari-mutuel, information efficiency, maximum likelihood estimation
JEL Classification: D81
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