A mathematical analysis of an exchange-traded horse race betting fund with deterministic payoff betting strategy for institutional investment to challenge EMH

Abstract

This paper's primary alternative hypothesis is Ha: profitable exchange-traded horserace betting fund with deterministic payoff exists for acceptable institutional portfolio return-risk. The primary hypothesis challenges the semi-strong efficient market hypothesis applied to horse race wagering. An optimal deterministic betting model (DBM) is derived from the existing stochastic model fundamentals, mathematical pooling principles, and new theorem. The exchange-traded betting fund (ETBF) is derived from force of interest first principles. An ETBF driven by DBM processes conjointly defines the research's betting strategy. Alpha is excess return above financial benchmark, and invokes betting strategy alpha that is composed of model alpha and fund alpha. The results and analysis from statistical testing of a global stratified data sample of three hundred galloper horse races accepted at the ninety-five percent confidence-level positive betting strategy alpha, to endorse an exchange-traded horse race betting fund with deterministic payoff into financial market.