Testing Market Efficiency: Evidence From The NFL Sports Betting Market

Abstract

This article examines the efficiency of the National Football League (NFL) betting market. The standard ordinary least squares (OLS) regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows us to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In‐sample tests indicate that probit‐based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out‐of‐sample testing, there is some inconsistency among the remaining out‐of‐sample predictions. Our results also suggest that widely documented inefficiencies in this market tend to dissipate over time.

Intuitive confidence: Choosing between intuitive and nonintuitive alternatives.

“…The point is that the slightest change in the [spread] in your favor will greatly increase your profits. Intuitive biases are interesting in the context of sports gambling, where many researchers and laypeople believe that point spreads typically equate the betting on each team (e.g., Gandar, Dare, Brown, & Zuber, 1998;Gray & Gray, 1997;Surowiecki, 2004) and where highly motivated decision makers are able to easily process and understand the constraint information (i.e., point spreads). Indeed, the fact that strong intuitive biases arise in this context suggests that intuitive biases are not a mere product of people's failure to process constraint information in the environment, as they persist even when people recognize such unambiguous and quantifiable constraints on their intuitions-and, indeed, even when people set the constraints themselves.…”

Efficiency and formation of expectations: evidence from the European investment survey

“…Finally, an extensive literature focuses on the efficiency of betting markets by testing the rationality of market participants' in forecasting (Gray and Gray, 1997;Boulier, et al, 2006).…”

The efficiency of top agents: An analysis through service strategy in tennis

“…Moreover, sports 3 data are readily available and they are measured much more precisely than most economic data. This has led to studies on racial discrimination (Gwartney and Haworth, 1974;Kahn and Sherer, 1988;Nardinelli and Simon, 1990;Stone and Warren, 1999;Szymanski, 2000;Kanazawa and Funk, 2001;and Goff, McCormick and Tollison, 2002), efficiency of the betting market (Zuber, Gandar and Bowers, 1985;Sauer, Brajer, Ferris and Marr, 1988;Golec and Tamarkin, 1991;Dixon and Coles, 1997;and Gray and Gray, 1997), comparison of betting markets and financial markets (Levitt, 2004), the effect of labor strikes on consumer demand (Schmidt and Berri, 2004), preferences under risk (Julien and Salanié, 2000), mixed strategy equilibria Wooders, 2000, 2001;Chiappori, Levitt and Groseclose, 2002;and PalaciosHuerta and Volij, 2008), incentive effects (Ehrenberg and Bognanno, 1990), rationality (Gandar, Zuber, O'Brian and Russo, 1988), optimal labor contracts (Lazear and Rosen, 1981), control of externalities (Carlton, Frankel and Landes, 2004), favoritism (Garicano, Palacios-Huerta and Prendergast, 2005), maximizing behavior of firms (Romer, 2006;and Adams, 2006), and so on.…”