Are Sports Betting Markets Semi-Strong Efficient? Evidence From the COVID-19 Pandemic

Abstract

This paper examines whether sports betting markets are semi-strong form efficient—i.e., whether new information is rapidly and completely incorporated into betting prices. We use news on ghost games in the top European football leagues due to the COVID-19 pandemic as a clean arrival of new public information. Because spectators are absent during ghost games, the home advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers and betting exchanges systematically overestimated a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semi-strong form efficient. Examining different leagues, we find that our main results are driven by the German Bundesliga, which was the first league to resume operations. We exploit a betting strategy that yields a positive net payoff over more than one month.

When the league table lies: Does outcome bias lead to informationally inefficient markets?

“…Furthermore, Meier et al. (2021) show that the effect of ghost games on home advantage was incorrectly incorporated into betting prices. However, this inefficiency disappeared after approximately 5 weeks.…”

“…For example, Deutscher et al (2018) find that mispricing of recently promoted teams disappears after mid-season. Furthermore, Meier et al (2021) show that the effect of ghost games on home advantage was incorrectly incorporated into betting prices. However, this inefficiency disappeared after approximately 5 weeks.…”

Are Betting Markets Inefficient? Evidence From Simulations and Real Data

“…Evidence on biased betting odds towards home teams has been provided by, for example, Angelini & De Angelis (2017), Vlastakis et al (2009), and Forrest & Simmons (2008). The study by Meier et al (2021) finds no such effect. When biased odds result from bettors' sentiment, it is referred to as sentiment bias in the literature.…”

“…With the initially vanishing home advantage during COVID-19, the research covers betting markets’ (non)response to such changes. Papers by (Fischer & Haucap, 2022; Meier et al, 2021; Winkelmann et al, 2021) record temporal inefficiencies in betting markets as bookmakers did not adjust the winning chances by home teams accordingly.…”

The Wisdom of No Crowds: The Reaction of Betting Markets to Lockdown Soccer Games

“…Winkelmann et al (2021) argue that bookmakers mispriced the reduction in home advantage for initial Bundesliga matches played behind closed doors. Meier et al (2021) argue temporary inefficiencies existed for early lockdown matches, concluding that in the short run, betting markets were not efficient. Fischer and Haucap (2021) suggest that the strength of the home advantage effect changed over the course of the lockdown period but that betting markets did not adjust their pricing of this element, also suggesting a possible inefficiency.…”