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Title: Market prices reaction to information: A quasi-experiment Authors:  Romain Gauriot - New York University Abu Dhabi (United Arab Emirates) [presenting]
Lionel Page - University of Technology Sydney (Australia)
Abstract: The aim is to investigate whether prices on a financial market over or underreact to new information. To do so, we use a quasi-experimental setting where we can compare the arrival of an informational shock to a very similar situation where this shock did not happen. Specifically, we look at in-play betting market prices for Association Football matches and we investigate how their prices react when a shot lands on a post. We use shots hitting the post and landing inside the goal as the events of interest (informational shock) and the shots bouncing off the post as the counterfactual situations. Comparing these two situations, we find that most of the time, prices react efficiently to the arrival of a goal. However, we find under-reaction in some cases where the informational shock is large. In particular, in the last 20 minutes of the match there is a large under-reaction when the score moves from a draw to a winning situation. These results are robust to adjustment for multiple testing.