Some Evidence of Insider Knowledge in Horse Race Betting in Britain

In recent paper, Dowie (1976) investigated equity of market for betting on horse races in Britain. He concluded that market was not strongly inefficient in sense that there was no evidence of subset of investors possessing superior information to that generally available to public; in Dowie's own words, his position is that the 'outsider' has access to as good information as 'insider' (p. 150) and that his results are a genuine challenge to conventional wisdom that betting markets are strongly inefficient (p. 150). The purpose of this note is to suggest that Dowie's methodology is not an appropriate way to test hypothesis of strong inefficiency and to argue that redesigned test of same data sources used by Dowie gives evidence consistent with there being substantial opportunities for profitable insider trading. The new test and its results are presented in Section II. In Section III some implications of evidence are noted.