This paper examines the efficiency of the legal gambling market for major league baseball. Weak‐form tests of market efficiency within and across odds lines are performed. Surprisingly, the consistently observed favorite‐longshot bias in racetrack betting is shown to exist in reverse for baseball bettors. However, these and other deviations from efficiency are shown to be insufficient to allow for profitable betting strategies when commissions are considered.

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There is evidence that stock market investors overreact to stocks that have been identified as winners and losers. This article examines whether contrarian strategies of selling (betting against) winners and buying (betting on) losers are successful in the gambling market for professional football. Contrary to the stock market, National Football League betting is found to be highly efficient. Because risk is constant for all football wagers, results support the argument that abnormal returns paid to contrarian stock market investors may be attributed to the higher risk incurred.Amuch-debatedtopicinfinancialeconomicsiswhetherindividualsoverreactto information. Evidence of long-term overreaction by stock market investors has been discussed by DeBondt and Thaler (1985), who provided empirical evidence that contrarian strategies of buying losers and selling winners yield higher returns relative to the entire market. Chan (1988) and Fama and French (1992) counter that their findings were a consequence of risk differentials; that is, losers, or value stocks, are fundamentally riskier. La Porta, Lakonishok, Shleifer, and Vishny (1997) concluded that there is no fundamental risk difference and that contrarian strategies owe their success to the expectational errors about future earnings made by investors. Although most researchers acknowledge the existence of superior returns to contrarian strategies, the explanation for their success is still in dispute. Given the inherent complexities of the stock market, the controversy is likely to continue.This article contributes to the debate by extending the analysis beyond the stock market, specifically, to the legal betting market in Nevada for professional football. The simplicity of this market allows for the construction of tests that are less subject to criticism and conflicting interpretations. Bettors can overreact to any game-