I am a huge fan of shavings as bedding, but if your horse has COPD or a respiratory problem then paper is sometimes very good as even straw can be dusty (depends on the make). I have not herd of pellets before?! only ever used shavings, straw, paper or rubber matting. xx
Shavings, except if we have a mare ready to foal then we switch to straw right before birth and for the first month or so of the foals life, then switch to a mix of shavings and straw then back to shavings.