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dc.contributor.authorAuld, T.
dc.contributor.authorLinton, O.
dc.date.accessioned2017-11-15T15:23:40Z
dc.date.available2017-11-15T15:23:40Z
dc.date.issued2017-11-07
dc.identifier.otherCWPE1750
dc.identifier.urihttps://www.repository.cam.ac.uk/handle/1810/269314
dc.description.abstractWe study the behaviour of the Betfair betting market and the sterling/dollar exchange rate (futures price) during 24 June 2016, the night of the EU referendum. We investigate how the two markets responded to the announcement of the voting results. We employ a Bayesian updating methodology to update prior opinion about the likelihood of the final outcome of the vote. We then relate the voting model to the real time evolution of the market determined prices. We find that although both markets appear to be inefficient in absorbing the new information contained in vote outcomes, the betting market is apparently less inefficient than the FX market. The different rates of convergence to fundamental value between the two markets leads to highly profitable arbitrage opportunities.
dc.publisherFaculty of Economics
dc.relation.ispartofseriesCambridge Working Papers in Economics
dc.rightsAll Rights Reserveden
dc.rights.urihttps://www.rioxx.net/licenses/all-rights-reserved/en
dc.subjectEU Referendum
dc.subjectPrediction Markets
dc.subjectMachine Learning
dc.subjectEfficient Markets Hypothesis
dc.subjectPairs Trading
dc.subjectCointegration
dc.subjectBayesian Methods
dc.subjectExchange Rates
dc.titleThe Behaviour of Betting and Currency Markets on the Night of the EU Referendum
dc.typeWorking Paper
dc.identifier.doi10.17863/CAM.15513


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