Football Betting Research Articles

The degree of inefficiency in the football betting market Statistical tests

Abstract This paper tests the hypothesis that the football betting market is efficient. Our statistical tests are stronger than those in previous studies, and we examine both NFL and college data over a sample period of fifteen years. Our statistical tests detect two specific biases in the NFL market and an unspecified bias in the college market. We examine the year-to-year consistency and magnitudes of the biases and find that the NFL bias against home teams has been nearly eliminated, while the bias against underdogs has increased. Profitable exploitation of the biases depends upon transaction costs.

Anomalies: Saving, Fungibility, and Mental Accounts

Last New Year's day, after a long evening of rooting the right team to victory in the Orange Bowl, I was lucky enough to win $300 in a college football betting pool. I then turned to the important matter of splurging the proceeds wisely. Would a case of champagne be better than dinner and a play in New York? At this point my son Greg came in and congratulated me. He said, “Gee Dad, you should be pretty happy. With that win you can increase your lifetime consumption by $20 a year!” Greg, it seems, had studied the life-cycle theory of savings. The theory is simple, elegant, and rational—qualities valued by economists. Unfortunately, as Courant, Gramlich, and Laitner observe “for all its elegance and rationality, the life-cycle model has not tested out very well.” In this column, however, I focus on an assumption of the life-cycle model that has not received very much attention, but which, if modified, can allow the theory to explain many of the savings anomalies that have been observed. The key assumption is fungibility. This column will review a small portion of the empirical savings literature, with the objective of showing how violations of fungibility, and more generally the role of self-control, strongly influences saving behavior.

Market rationality tests based on cross-equation restrictions

The information used by researchers in cross-equation tests of rational expectations may be a small subset of the information available to the market. Such tests produce consistent estimates, but have low power. We develop a mechanism for dealing with this problem and use the procedure to perform cross-equation tests on predictions from the football betting market. The tests fail to reject rationality. We provide evidence that market predictions from betting markets are not formed rationally. It appears, therefore, that cross-equation tests have low power even if the information sets used by the researcher and the market are approximately the same.

The efficiency of certain speculative markets and gambler behavior

This paper tests the efficiency of the football betting market and develops a model of the determinants of the closing spread. The empirical results suggest that the football betting market is not perfectly efficient. The evidence also suggests that, contrary to previous studies, gamblers that do bet the long shots are acting as rational individuals attempting to maximize their return for a given level of risk. Finally, at least six variables were found to be statistically significant factors in determining closing spreads in the football betting market.

Beating the Spread: Testing the Efficiency of the Gambling Market for National Football League Games

In this paper we test the efficiency of the gambling market for National Football League games. Two efficiency tests are conducted. The first test is derived from the finance literature on market efficiency, while the second test is based on a market's being efficient when the rate of return on any gambling strategy based on publicly available information approximates the bookmaker's commission. While the first test is found to be too weak to establish conclusions about the efficiency of the NFL gambling market, the second test results, showing the existence of profitable betting opportunities, indicate that speculative inefficiencies exist in this market.

Market Efficiency and Football Betting

Market Efficiency and Football Betting