Does transparency imply efficiency? The case of the European soccer betting market

Abstract

We discover mispricing in an apparently transparent market -the European soccer betting market. Efficiency differences between countries are accounted for by variations in league competitiveness. We conclude that barriers to efficiency (e.g., risk evaluation problems) may remain in transparent markets.

Betting Market Efficiency in the Presence of Unfamiliar Shocks: The Case of Ghost Games During the COVID-19 Pandemic

“…Bundesliga odds imply a negative longshot bias, as the coefficient of p ij is significantly smaller than 1. This is consistent with previous results by Forrest & Simmons (2008) on Spanish and Scottish professional soccer, but it contrasts previous findings on the German second division (for different seasons though) by Oikonomidis et al (2015). Our finding implies that bettors can outperform the market by betting on low probability wins, hence contradicting the efficient market hypothesis.…”

“…A (negative) longshot bias cannot be found in the first division (Bundesliga) which contrasts who have found such a pattern for matches played between 2006 and 2017. The finding is consistent tough with Oikonomidis et al (2015). A potential reason for the inefficiency only being present in the second division could be the relatively thin betting market for second division games, as accuracy tends to increase with the market size (Brown & Yang 2019).…”

“…However, most studies take a static look at betting markets and their inefficiencies, as they mainly focus on behavioral biases such as the favorite-longshot bias, sentiment bias or mispricing of the home advantage across several seasons which can be identified by analysing past data. Especially the favorite-longshot bias, namely that bets on clear favorites are more profitable than bets on underdogs, has attracted much attention (Cain et al 2003), , Cain et al 2000, Deschamps & Gergand 2007, Oikonomidis et al 2015, However, there is also evidence of markets without any, with only a weak, or even with a reversed longshot pattern , Forrest & Simmons 2008, Franck et al 2011, Goddard & Asimakopoulos 2004, Kuypers 2000, Oikonomidis et al 2015 1 . Potential reasons for the longshot bias can be risk-hedging pricing strategies of betting providers against insider trading (Cain et al 2003, Shin 1991, 1992, 1993, bettors' overconfidence or image effects (Direr 2011, Golec & Tamarkin 1995, Williams 1999, bettors' willingness to especially make profit from correctly predicting unexpected match outcomes (Sauer 1998), and odd salience.…”

Home advantage in professional soccer and betting market efficiency: The role of spectator crowds

“…Although this paper focusses on inefficiencies from shocks, also note that Bundesliga 2 odds imply a slightly negative longshot bias, as the coefficient of p tm is always significantly smaller than 1 at the 10% significance level. This is consistent with previous results by Forrest and Simmons (2008) on Spanish and Scottish professional soccer, but contrasts earlier findings on the Bundesliga 2 by Oikonomidis et al (2015). Our finding implies that bettors can outperform the market by betting on low probability wins, hence contradicting the efficient market hypothesis.…”

“…Especially the favorite‐longshot bias, namely that bets on clear favorites are more profitable than bets on underdogs, has attracted much attention (Angelini & De Angelis, 2019; Cain et al, 2000, 2003; Deschamps & Gergand, 2007; Oikonomidis et al, 2015; Reade et al, 2020). However, there is also evidence of markets without any, with only a weak, or even with a reversed longshot pattern (Angelini et al, 2022; Angelini & De Angelis, 2019; Elaad et al, 2020; Forrest & Simmons, 2008; Franck et al, 2011; Goddard & Asimakopoulos, 2004; Kuypers, 2000; Oikonomidis et al, 2015). Potential reasons for the longshot bias can be risk‐hedging pricing strategies of betting providers against insider trading (Cain et al, 2003; Shin, 1991, 1992, 1993), bettors' overconfidence or image effects (Direr, 2011; Golec & Tamarkin, 1995; Sauer, 1998; Vaughan Williams, 1999) and odd salience.…”