Mass market mood swings

Yesterday, The Sport Review.com carried the following headline: 'Bookmakers have slashed the odds on French international star Franck Ribery heading to Anfield from Bayern Munich.' This is interesting: either bookmakers had inside information leading them to reduce their odds so as to minimise any potential payouts should Ribery sign for Liverpool; OR, yesterday, betting patterns were such that large amounts of money were being placed by punters on the likelihood of a move to Merseyside by France's leading player. Whichever is correct, this is interesting and raises the question: to what extent are gambling markets, particularly online gambling markets where large groups of people have access to significant amounts of information that can enable them to make quick, well informed and public decisions, an accurate predictor of market activity? (notwithstanding the fact that some gambling markets may sometimes be exposed to irregular and possibly illegal gambling activities). In his book, 'The Wisdom of Crowds', James Surowiecki explains how 'large groups of people are smarter than an elite few, no matter how brilliant—better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.' Does the sport gambling market thus serve as a decision-making and signalling mechanism for events that take place in sport? If the betting is that Ribery is going to Liverpool, does it mean that Ribery actually is going to Liverpool? If so, how should sports teams, clubs and other relevant organisations factor the power of large groups into their decision-making processes? Or are movements in betting patterns completely fallacious and no indication of anything other than the willingness of a small number of people to lose money guessing what might happen to football transfers and other sport-related activities?