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@MISC{Cain00theincidence,
    author = {Michael Cain and David Law and David A. Peel},
    title = {The Incidence Of Insider Trading In Betting Markets And The Gabriel And Marsden Anomaly},
    year = {2000}
}

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Abstract:

INTRODUCTION Research on efficient markets theory has focused on the discovery and explanation of anomalies that appear to be inconsistent with the efficient markets hypothesis. It is now appreciated that betting markets share many characteristics with financial markets, in particular large numbers of investors (bettors), with readily available cheap sources of information, involved in the purchase of statecontingent assets (bets). Shin (1991, 1992 and 1993) has recently emphasised this affinity by developing insider-outsider models of financial markets to examine the horse-race betting market. Shin portrays the problem that bookmakers face in setting odds on the various horses in a race as being entirely one of a market-maker determining optimal prices in the presence of a (known) percentage of insider traders, who are assumed to know which horse will win, and a percentage outsiders whose preferences are distributed over all horses. The odds or prices set by bookmakers have to be su

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