DO BETTERS PREFER LONG SHOTS BECAUSE THEY ARE RISK-LOVERS, OR ARE THEY JUST OVERCONFIDENT

This study examines whether betters' risk preferences or overconfidenc e in choosing winners better explains their well documented preference for low-probability wagers. Although previous studies using racetrack data often suggest that risk-loving behavior explains long-shot prefe rence, such data cannot distinguish between the alternative explanatio ns. We use football betting data to make the comparison and find that overconfidence more closely fits the data. This result complements evi dence of overconfidence from behavioral studies as well as stock-marke t models of overconfident noise traders.