lukestein’s avatarlukestein’s Twitter Archive—№ 16,798

              1. 🧑🏾🐎🧑🏽🐎🧑🏼🐎 New: “Racial discrimination in asset prices: Evidence from horse betting” w/ @SpencerBarnes99 If gamblers underestimate minority trainers (or just don’t 𝘭𝘪𝘬𝘦 them), their horses may generate higher risk-adjusted returns! Download WP lukeste.in/horsebetting 1/7
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            1. …in reply to @lukestein
              US 🐎 is parimutuel—gamblers bet against each other—so investor bias can make equilibrium asset prices diverge from fundamentals Bettors “underbet” horse trainers with nonwhite-names, who therefore lose less 💵 (and win/finish better than odds imply) Looks like bias! But… 2/
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          1. …in reply to @lukestein
            As usual with finance, we have to think about 𝙧𝙞𝙨𝙠 as well as returns Among the best-known 🐎 regularities is the “favorite-longshot bias” (FLB) where risky bets generate very negative returns—big lit incl. @JustinWolfers and Snowberg journals.uchicago.edu/doi/10.1086/655844 3/
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        1. …in reply to @lukestein
          @JustinWolfers Because longshots lose more money, they should attract unsophisticated and less informed bettors And that’s exactly where racial/ethnic bias has big pricing impacts! tl;dr: Looks like unsophisticated discriminators drive down returns on long shots with white-named trainers 4/
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      1. …in reply to @lukestein
        @JustinWolfers Racial/ethnic return differences are stronger— overall and especially among longshots where bettors may be less informed/sophisticated or limits to arbitrage stronger: • “Win” vs. “place” and “show” bets • Horses w/ poor prior performance • Low-stakes • “Fast” conditions 5/
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    1. …in reply to @lukestein
      The whole paper’s about horse racing, but we think there are some lessons about where else bias may affect asset prices: markets with unsophisticated or poorly-informed investors and limits to arbitrage 6/
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  1. …in reply to @lukestein
    Finally, 𝙣𝙤𝙩 𝙞𝙣𝙫𝙚𝙨𝙩𝙞𝙣𝙜 𝙖𝙙𝙫𝙞𝙘𝙚 but… You can try betting on horses with nonwhite-named trainers¹ that are neither extreme favorites² nor extreme longshots³ Like La Villana at 12/1 😉 ¹who face bias ²smart money’s less biased ³chased by too much dumb money 7/
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    1. …in reply to @lukestein
      Thanks for reading 🙌 @SpencerBarnes99 and I have had a ton of fun on this and I’ve learned a lot working with him Download link🔗 and retweet button🤌 in the first post quoted here for your convenience👇 @lukestein/1824244024699457716
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