Point Spread Betting Research Articles

On Sports Betting and Uncertainty of Outcome

Abstract: This paper provides an explanation for sports betting that does not appeal to risk-preferring preferences. The strategy is to link betting to the uncertainty of outcome hypothesis, a cornerstone of sports economics. The model relies on the inclusion of a contest utility function as part of a fan’s overall utility. The analysis focuses on point-spread betting and shows that sports fans can increase their contest utility by placing a bet if the contest is unequal and if they are either non-partisan or are sufficiently strong supporters of the underdog. When these conditions are met, an individual will place the bet if the utility gain offsets the expected cost.

Market Efficiency and Censoring Bias in College Football Gambling

The team totals and point spread betting lines jointly predict team scores in college football games. The gambling market’s score predictions are shown to be biased due to censoring at zero points. This presents arbitrage opportunities for gamblers who place wagers on the team totals line in cases for which expected bias is high. A naïve betting strategy that exploits this bias using only information contained within the two betting lines themselves yields a win percentage of over 55 percent over the past two decades. This significantly exceeds the typical transaction costs associated with wagers, indicating the market is semi-strong inefficient.

Scoring Benefits to Eastward Travel in the NBA

Travel across time zones may affect player scoring through circadian rhythm. We test how travel affects scoring for the US National Basketball Association from 2014–2018, a period featuring a new game scheduler. We also test whether a collective bargaining agreement that protected player rest changed how travel affects scoring. We find eastward travel increases scoring and point spread via three-pointers and field goals, with implications for point spread betting in sports gambling markets. The 2017 collective bargaining agreement mitigates the eastward travel benefit on scoring and increases scoring overall, suggesting improved fairness and potential benefits for players and fans.

Modeling basketball games by inverse Gaussian processes

The scoring processes of home and away team in basketball games are modeled by two dependent inverse Gaussian processes with a team-specific parameter that measures the team strength. A common latent variable that measures the game pace is designed to characterize the dependence. A moment estimation method combined with maximum likelihood estimation is proposed to fit the parameters and a Bayesian method is applied to update the estimation and make in-game predictions. It is shown that the proposed model can obtain the same performance as the benchmark model, Gamma process model, in outcome prediction, point spread betting and model gambling.

A gamma process based in-play prediction model for National Basketball Association games

This paper presents an in-play prediction model based on the gamma process for the scoring processes of the National Basketball Association matches. The model is team-specific, i.e., it takes account of the relative strengths of the two teams playing in a match. The dependence between the home and away scoring processes is characterized by a common latent variable. A Bayesian dynamic forecasting procedure for future games is developed, which utilizes the in-match information to update the scale parameter of the model as the match progresses. An evaluation against baseline models is provided in an empirical study. Our proposed model can predict the final score and total points, while the baseline models are unable to make such predictions. Furthermore, our model can produce positive returns on the point spread betting market and the over-under betting market.

NFL Betting Biases, Profitable Strategies, and the Wisdom of the Crowd

This paper finds that betting biases in the NFL market go beyond preferring to bet on the favorite team and the over. The results show that as more bettors place wagers, the percentage of wagers on the favorite team increases. Additionally, bettors have a preference to bet against the line movement to receive better betting odds in the point spread market. Moreover, bettors prefer betting on the favorite when the away team has lost recent games and on the over when the home team has been covering the over in recent games. Furthermore, bettors have a nonlinear preference in the point spread betting, as they are less likely to wager on the favorite when the spread is small or large. Finally, economically profitable strategies are put forth based upon the percentage of bettors betting on the favorite or over by using a contrarian strategy when 50% to 60% of bettors place the same wager. These results have important implications as they can be used by the sportsbook to create betting lines to maximize profit.

NFL Betting Biases, Profitable Strategies, and the Wisdom of the Crowd

This paper finds that betting biases in the NFL market go beyond preferring to bet on the favorite team and the over. The results show that as more bettors place wagers, the percentage of wagers on the favorite team increases. Additionally, bettors have a preference to bet against the line movement to receive better betting odds in the point spread market. Moreover, bettors prefer betting on the favorite when the away team has lost recent games and on the over when the home team has been covering the over in recent games. Furthermore, bettors have a nonlinear preference in the point spread betting, as they are less likely to wager on the favorite when the spread is small or large. Finally, economically profitable strategies are put forth based upon the percentage of bettors betting on the favorite or over by using a contrarian strategy when 50% to 60% of bettors place the same wager. These results have important implications as they can be used by the sportsbook to create betting lines to maximize profit.

NFL Betting Biases, Profitable Strategies, and the Wisdom of the Crowd

Abstract: I find that betting biases in the NFL market extend beyond preferring the favorite and the over. The results show that the percentage of wagers on the favorite team increases as more bettors place wagers, bettors have a preference for betting against the line movement, and they prefer to bet on the favorite when the away team has lost recent games. Furthermore, bettors have a nonlinear preference in the point spread betting, as they are less likely to wager on the favorite when the spread is small or large. In the totals market, bettors wager the over when the home team has covered the over in recent games. Finally, using a contrarian strategy when 50% to 60% of bettors place the same wager is shown to make economic profits. These results have important implications, as the sportsbook can use them to create betting lines to maximize profit.

The Impact of "Jet Lag" on the AFL Point Spread Wagering Market

This paper examines the presence of "jet-lag" effects in the Australian Football League point spread betting market. Fodor and Krieger’s (2014) findings that bookmakers, in NFL betting markets, do not consider efficiently the possible impact of jet lag on team performance, and are unable to take into account the possible existence of a potentially confounding home team bias since in virtually all games in the NFL, one of the teams has an a priori home ground advantage. Schnytzer and Weinberg (2008) took advantage of the distinctive feature of the Australian Football League (AFL), that many fixtures take place on neutral grounds, to demonstrate the apparent existence of a home team bias and the absence of a favorite-longshot bias. We conduct standard econometric tests of market efficiency over games where the home team bias cannot, by definition, exist. We used the 2001-2016 AFL seasons including the final series matches, venues, and betting information data and found no statistically significant line inefficiency in the games played on neutral grounds, regardless of whether the visiting team travels across multiple time zones in either direction or whether neither team requires a flight to reach the relevant stadium. However, line inefficiencies were found in overall games in which the home team enjoys an a priori home ground advantage. Such inefficiencies occur both in games where the visiting team experiences time zone changes when traveling to the game, and in games where the visiting team experiences no such changes. The amalgamated results for both neutral games and home bias games makes clear that jet lag cannot serve as a sole factor leading to inefficiencies but merely if combined with the home team bias. We show that betting on games in various inefficient sub-groups yields returns between 1.26 and 8.07 percent.

Point-Spread Wagering Markets' Analogue to Realized Return in Financial Markets

Tests for market efficiency and rational behavior in financial markets commonly utilize realized return as the variable of interest. Researchers who study point-spread wagering markets for sporting events generally agree that the point spread is these markets' analogue to asset price in financial markets. An issue that is less clear, to date, is upon exactly which variable researchers should focus when testing for efficiency and rationality in point-spread betting markets. The objective of this article is to verify that change in point spread is an acceptable proxy for realized return.

The late-season bias: explaining the NFL's home-underdog effect

This article examines price efficiency and out-of-sample predictability in the NFL point-spread betting market. Our main contribution to the existing literature is the identification of a persistent increase in bias magnitude during the final few weeks of each season. We demonstrate that this anomaly causes the much-documented home-underdog effect. We also offer evidence that the limits of arbitrage have enabled this phenomenon to persist for decades. Finally, we use several regression models to confirm our univariate analysis and show that these models can be used to implement profitable betting strategies. The predictive models presented differ from those in the prior literature by taking into account both short-term and aggregate biases.

The home team weather advantage and biases in the NFL betting market

We test price efficiency in the NFL point spread betting market by examining the relationship between betting line forecast errors and game day temperatures for 5463 NFL games from 1981 to 2004. Our main contribution to the existing literature is the identification of a mispriced acclimatization advantage associated with games played in extreme temperature conditions. Results suggest that game day temperature significantly affects team performance and that this information is not efficiently incorporated into bet prices.

Market Efficiency and March Madness: Empirical Tests of Point Spread Betting

This paper presents the first empirical documentation of the entertainment value of gambling in national point spread gambling markets and the first axiomatically sound, efficient, and rational model of point spread gambling markets. I use asset classes to test National Collegiate Athletic Association Basketball Tournament point spread betting market efficiency via latent class analysis and Ordinary Least Squares (OLS) regressions. In sample, I document efficiency except for lower seeded favorites, which may suggest additional pricing factors like entertainment value. The point spread's explanatory power has increased from the early years, but diminishes as the tournament progresses. The point spread has more explanatory power than seeding dummy variables over both margin of victory and win incidence. I find a structural break in the OLS coefficients. Higher seeded teams' ability is more homogeneous.

The Search for Informed Traders in the Totals Betting Market for National Basketball Association Games

A recent article on line changes in the point spread betting market for National Basketball Association games found evidence that trading incorporates information into price. This article examines a closely related but previously unexamined betting market—the betting market for the total points scored in a game. The authors find that closing totals lines are more accurate forecasts of total points scored than are opening totals lines. It is shown that line changes move betting lines in the correct direction and by the appropriate magnitude to eliminate biases in opening totals lines. Line changes in this betting market, like those in the point spread betting market, cause prices to more accurately reflect fundamental values.

Testing effeciency in Gambling markets: a comment

In a recent article in this journal, Even and noble point out that the regression-based test for unbiasedness in point spread betting markets is not valid test when the mean and median of the market's forecast errors are different. In the case where skewness is present, Even and noble propose a likelihood ratio statistic to test for market efficiency. In this comment, three concerns are explored: (i) whether distributions of market forecast errors in these markets are consistently and significantly skewed; (ii)whether the test proposed by Even and Noble suffers from the same problem of low power as do other statistical tests in these markets;(iii)whether the Even and Noble test statistic is actually a new test or simply the equivalent of very simple, well-known statistical test.

The Effects of Risk Aversion on Wagering: Point Spread versus Odds

Currently, casinos and bookies use the point-spread method for betting on football games. Since an odds system is used in various other sports, what factors explain the current structure of the betting market? As the bookie's profits are a percentage of the total money wagered, the existence of point-spread betting indicates that the total money wagered under this betting scheme is greater than that generated by odds betting. This paper suggets that the current market structure is a consequence of risk-averse attitudes of bettors.

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.

Point Spreads versus Odds

Why do bookies use the point-spread device for wagering on football games when odds betting on the winner is also feasible? One possibility is that point-spread betting is than odds betting. The existence of point spreads, however, does not logically entail this more fun explanation. Given simple specifications of beliefs and betting behavior, and given that point spreads and odds are equally thrilling, it is demonstrated that the point-spread game can exist as the game produced by a profit-maximizing bookie. The disparate beliefs which create the demand for some form of betting market can also explain the particular betting game produced by the bookie.