Publication Type
Journal
Journal Name
Risks
Publication Date
Page Number
95
Volume
11
Issue
5
Abstract
We provide new evidence of a favorite long-shot bias for bets placed on baseball games. Our analysis uses the difference of mean run differentials as an observable proxy for the probability of a team to win. When baseball is viewed through this proxy, we see that bettors believe favorites are less likely to win than they actually are and long-shots more likely. This result is consistent with prospect theory, which suggests that large and small probabilities are poorly estimated when making decisions with risk.
