Chapter 76 Asset Market Manipulation: A Field Experiment with Racetrack Betting

The studies were designed to test whether active naturally-occurring markets could be manipulated experimentally in a way that permitted statistically powerful identification of whether manipulation generally works (rather than anecdotal evidence). The studies also serve as a reminder that true experiments can sometimes be conducted in the field, cheaply; we should seize those opportunities when they arise, or create them. More generally, the inability of these large bets to move the market systematically is a blow to the beliefs of those who think markets are easily and routinely manipulated by large investors. For those who do not believe manipulation is common, and instead are inclined to marvel at the mysterious collective intelligence of centralized markets populated by self-interested traders, the general immunity of these markets to substantial, systematic attempts at manipulation may represent something new to explain, or at least marvel at.