Downside financial risk is misunderstood

The mathematics of downside financial risk can be difficult to understand: For example a 50% loss requires a subsequent 100% gain to break-even. A given percentage loss always requires a greater percentage gain to break-even. Instead, many non-expert investors may assume for example that a 50% gain is sufficient to offset a 50% loss. Over 3,498 participants and five experiments, the widespread illusion that a sequence of equal percentage gains and losses produces a zero overall return was demonstrated. Participants continued to err frequently, even with percentage returns of +/-100%, or when financially incentivized. Financial literacy, numeracy, and deliberation were all shown to independently contribute to accurate performance. These results have implications for promoting the understanding of downside financial risk

How bookies make your money

UK bookies (bookmakers) herd geographically in less-affluent areas. The present work shows that UK bookies also herd with the special bets that they advertise to consumers, both in their shop window advertising and on TV adverts as shown to millions of viewers. I report an observational study of betting adverts over the 2014 soccer World Cup. Bet types vary in complexity, with complex types having the highest expected losses. Bookies herded on a common strategy of advertising special bets on two levels: by almost exclusively advertising complex bet types with high expected losses, and by advertising representative events within a given complex bet type. This evidence is most consistent with bookies’ advertising targeting a representativeness heuristic amongst bettors. Bookies may know how to nudge bettors toward larger losses

How bookies play with your emotions to make you place unlikely bets

First paragraph: I first became aware of football “in-play” TV betting adverts around three years ago. In the first campaign of its type, Ray Winstone urges viewers to “bet in-play now” on the website Bet 365, by offering the odds on specific bets during high-profile football matches

Behavioral complexity of British gambling advertising

Background: The scale and complexity of British gambling advertising has increased in recent years. ‘Live-odds’ TV gambling adverts broadcast the odds on very specific, complex, gambles during sporting events (e.g. in soccer, ‘Wayne Rooney to score the first goal, 5-to-1,’ or, ‘Chelsea to win 2-1, 10-to-1’). These gambles were analyzed from a behavioral scientific perspective (the intersection of economics and psychology).  Method: A mixed methods design combining observational and experimental data. A content analysis showed that live-odds adverts from two months of televised English Premier League matches were biased towards complex, rather than simple, gambles. Complex gambles were also associated with high bookmaker profit margins. A series of experiments then quantified the rationality of participants’ forecasts across key gambles from the content analysis (TotalN = 1467 participants across five Experiments).  Results: Soccer fans rarely formed rational probability judgments for the complex events dominating gambling advertising, but were much better at estimating simple events.  Conclusions: British gambling advertising is concentrated on the complex products that mislead consumers the most. Behavioral scientific findings are relevant to the active public debate about gambling

People invest their money illogically – but trying to help them can make things worse

First paragraph: In a world where financial experts are frequently proven badly wrong, it is hardly surprising that many people take charge of saving for their retirements themselves. The realities of the financial world don’t make this easy, though. And neither does the peculiar psychology of investing – as research in which I have been involved helps to show

Why football bets are far more profitable to bookmakers than gambling machines

First paragraph: When the government completes its review of the gambling sector in the coming weeks, a clampdown on fixed odds betting terminals (FOBTs) looks to be on the cards. Dubbed the “crack cocaine of gambling” for allowing punters to bet stakes of up to £100 in games like roulette and poker, even former UK culture secretary Tessa Jowell has joined the chorus demanding curbs – despite overseeing their expansion in the 2000s

Investigating racial bias within Australian rules football commentary

International research has shown that live sports commentary exhibits racial bias. Specifically, non-White players are more likely to be praised in terms of their physicality, while White players are more likely to be praised in terms of their intellect and character. The current study, which utilised a quantitative content analysis design, examined whether the speech of AFL commentators exhibited racial bias. The study randomly selected 50 men’s AFL game quarters from the 2019 AFL season and analysed 1368 applicable statements directed at 382 unique players. Based on prior research, a coding instrument was developed that incorporated three main categories (physical, cognitive, and character attributes), and six subcategories (physical ability, appearance, cognitive ability, intelligence, general character, and hard work). In contrast to the international literature, findings revealed that there were no significant between-race differences for each main attribute category. However, non-White players received a higher proportion of statements related to their physical ability, and a lower proportion of statements related to their appearance compared to White players. Non-White players also received a higher proportion of negative statements related to their cognitive ability compared to White players. There was no evidence found to suggest that players of any race were discussed in terms of their physical ability being innate, natural, or instinctual. Given the strong, but also dated, evidence showing racial bias within both American and European sports commentary, the current study provides only weak evidence for the existence of racial bias within contemporary AFL live commentary