Informational efficiency and behaviour within in-play prediction markets

Studies of financial market informational efficiency have proven burdensome in practice, because it is difficult to pinpoint when news breaks and known by some or all the participants. We overcome this designing a framework detect mispricing, test evaluate behavioural biases within high-frequency prediction markets. demonstrate using betting exchange data for association football, exploiting moment first goal scored match as major that cleanly. There are pre-match in-play mispricing inefficiency these markets, explained reverse favourite-longshot bias (favourite bias). The tends increase surprise, such longshot team late match, with underestimating their chances going on win These results suggest that, even markets large crowds participants trading state-contingent claims, significant can be reflected prices.