Relative pricing of binary options in live soccer betting markets

Live soccer betting markets differ from other binary options markets in that all fundamental information is observable, the options mature in less than two hours and the markets are highly liquid. This study presents a new method for the identification of hidden information in market prices. The method is based on two independent Poisson distributions and on a numerical algorithm for the aggregation of all market price information into one rational number. The method is applied to an empirical dataset of real time market prices in 29,413 soccer games. The results indicate that the method selects the most profitable markets and allows for a significant improvement in average investment returns.     

Odds-setting efficiency in gambling markets: Evidence from the PGA TOUR

This paper describes the gambling market for PGA TOUR events for the 2002 season. The extent to which the odds predict the outcome is examined, illustrating how much information is captured in the odds and whether there are any identifiable biases in the odds. The overall implied profit to the casino is calculated as well as the returns to several naive betting strategies. By splitting the sample based on whether or not Tiger Woods is in the tournament, a “Tiger Woods effect” or a “thin market versus thick market effect” can be examined. On the whole, efficient markets propositions hold up, but the overwhelming share of the variation in the tournament outcome remains unexplained.     

Efficiency of online football betting markets

This paper evaluates the efficiency of online betting markets for European (association) football leagues. The existing literature shows mixed empirical evidence regarding the degree to which betting markets are efficient. We propose a forecast-based approach for formally testing the efficiency of online betting markets. By considering the odds proposed by 41 bookmakers on 11 European major leagues over the last 11 years, we find evidence of differing degrees of efficiency among markets. We show that, if the best odds are selected across bookmakers, eight markets are efficient while three show inefficiencies that imply profit opportunities for bettors. In particular, our approach allows the estimation of the odds thresholds that could be used to set profitable betting strategies both ex post and ex ante.     

Regional information and market efficiency: the case of spread betting in United States college football

Using game results over a seven year span (1999–2006), we find that United States college football teams in arid regions “win” against the spread in 56.64% of games in which they host a team from a humid region. This result provides statistically significant evidence for both weak and strong form inefficiency in the spread betting markets of such games. By examining other cases of intraregional and interregional competition within the sport, we conclude that this inefficiency does not arise from the effects of travel or home field advantage. Rather, the result indicates that climate aridity is an observed characteristic for which college football betting markets do not accurately control. It is quite rare to find strong form market inefficiency arise from a single variable rather than from an elaborate, multivariable betting strategy. Therefore, the effect of climate aridity upon college football spread betting market efficiency can be characterized as dramatic. It is conjectured that remote market participants may need to “experience” certain types of relevant regional information, such as climate, to act in a market efficient manner.     

Market efficiency in Scandinavian racetrack betting

This study analyzes Scandinavian racetrack betting markets. We discuss market efficiency and investor behavior in light of the fact that investors earn negative returns on average. Show bets on favorites in Norway yield a small positive return, while all the other betting markets are weak form efficient. We establish the favorite-longshot bias for quinella and exactor bettors, but not for win bettors. Our results can be explained by small pools and high track takes. Investors wagering at the racetrack have a different risk attitude than investors wagering off the track. We explain how our results should influence the design of betting products, especially with respect to the fraction of the pool returned to winners.     

Market efficiency and NCAA college basketball gambling

The betting market for NCAA college basketball is examined from the 1996–97 season through 2003–04. In the overall sample, market efficiency cannot be rejected. For big favorites, specifically those favorites of 20 or more, a simple strategy of betting the underdog in these games is shown to reject the null hypothesis of a fair bet since the underdog wins more than implied by efficiency. This bias appears to be the same as in other sports. The home-team bias in college basketball is shown to be the opposite of the other sports, however, since big favorites win more often than implied by efficiency. Potential reasons for this bias such as NCAA tournament incentives and uniformity of playing conditions are discussed.     

On determining probability forecasts from betting odds

We show that the probabilities determined from betting odds using Shin’s model are more accurate forecasts than those determined using basic normalization or regression models. We also provide empirical evidence that some bookmakers are significantly different sources of probabilities in terms of forecasting accuracy, and that betting exchange odds are not always the best source, especially in smaller markets. The advantage of using Shin probabilities and the differences between bookmakers decrease with an increasing market size.     

Testing the Wisdom of Crowds in the field: Transfermarkt valuations and international soccer results

This paper investigates the value of collective judgments which stem from settings that have not been designed explicitly to elicit the ‘Wisdom of Crowds’. In particular, I investigate information obtained from transfermarkt.de, an online platform where a crowd of registered users assess the value of professional soccer players. I show that forecasts of international soccer results based on the crowd’s valuations are more accurate than those based on standard predictors, such as the FIFA ranking and the ELO rating. When this improvement in forecasting performance is applied to betting strategies, it leads to sizable monetary gains. I further exploit information on the preferences of individual crowd members in order to investigate whether wishful thinking hampers the accuracy of crowd valuations, but fail to find evidence that such is the case.     

Additional evidence of heuristic-based inefficiency in season wins total betting markets: Major League Baseball

The large majority of sports betting papers have addressed questions of market efficiency based on the outcome of single game, such as spread (sides) or point totals wagers. This research examines the Major League Baseball (MLB) season wins total over/under betting market with respect to questions of market efficiency and profitability. Woodland and Woodland (2013, 2015) investigated the season wins total markets for the National Football League (NFL) and the National Basketball Association (NBA) and found significant inefficiencies. Betting rules tested in this paper parallel those proposed by Woodland and Woodland for the NFL and NBA. They aim to take advantage of the implications of the representativeness heuristic, that is, individuals expect results from a small number of games to generalize to the entire population. The MLB market is found to be inefficient, and provides opportunities for profitable wagering. We establish a tendency for bettors to overreact to a team’s performance in the previous season, particularly for teams with winning records. Results are consistent with the findings for the NFL and NBA season wins totals betting markets. This may be the consequence of monetary betting limits and a structure requiring the completion of a sport’s season before the bet outcome is determined, both of which could discourage some bettors from participating.     

A numerical study of tournament structure and seeding policy for the soccer World Cup Finals

Tournament outcome uncertainty depends on: the design of the tournament; and the relative strengths of the competitors – the competitive balance. A tournament design comprises the arrangement of the individual matches, which we call the tournament structure, the seeding policy and the progression rules. In this paper, we investigate the effect of seeding policy for various tournament structures, while taking account of competitive balance. Our methodology uses tournament outcome uncertainty to consider the effect of seeding policy and other design changes. The tournament outcome uncertainty is measured using the tournament outcome characteristic which is the probability P_q,R that a team in the top 100q pre‐tournament rank percentile progresses forward from round R, for all q and R. We use Monte Carlo simulation to calculate the values of this metric. We find that, in general, seeding favours stronger competitors, but that the degree of favouritism varies with the type of seeding. Reseeding after each round favours the strong to the greatest extent. The ideas in the paper are illustrated using the soccer World Cup Finals tournament.     

Are betting returns a useful measure of accuracy in (sports) forecasting?

In an economic context, forecasting models are judged in terms not only of accuracy, but also of profitability. The present paper analyses the counterintuitive relationship between accuracy and profitability in probabilistic (sports) forecasts in relation to betting markets. By making use of theoretical considerations, a simulation model, and real-world datasets from three different sports, we demonstrate the possibility of systematically or randomly generating positive betting returns in the absence of a superior model accuracy. The results have methodological implications for sports forecasting and other domains related to betting markets. Betting returns should not be treated as a valid measure of model accuracy, even though they can be regarded as an adequate measure of profitability. Hence, an improved predictive performance might be achieved by carefully considering the roles of both accuracy and profitability when designing models, or, more specifically, when assessing the in-sample fit of data and evaluating out-of-sample forecasting performances.     

Bettor preferences and market efficiency in football totals markets

The betting markets for totals in college football and arena football provide additional evidence of bettor preference for scoring. The results for college football and arena football markets are similar to those found in the professional football and professional basketball totals market. In all of these leagues, the overs are overbet. We suggest that there is a clear preference for bettors to bet the over and the extent of the bias depends upon the volume of uninformed bettors to informed bettors and limits placed on bets in these markets.     

The behaviour of betting and currency markets on the night of the EU referendum

We study the behaviours of the Betfair betting market and the sterling/dollar exchange rate (futures price) during 24 June 2016, the night of the EU referendum. We investigate how the two markets responded to the announcement of the voting results by employing a Bayesian updating methodology to update prior opinion about the likelihood of the final outcome of the vote. We then relate the voting model to the real-time evolution of the market-determined prices as the results were announced. We find that, although both markets appear to be inefficient in absorbing the new information contained in the vote outcomes, the betting market seems less inefficient than the FX market. The different rates of convergence to the fundamental value between the two markets lead to highly profitable arbitrage opportunities.     

You do not have to succeed,just do not fail: When do soccer coaches get fired?

This article deals with circumstances leading to the dismissal of a soccer coach. The article is based on results from the Premier League in England over 12 consecutive years. In this paper, we converted the scores of matches (win, draw, and loss) into an index based upon how results were perceived by club owners—those empowered with the decision as to whether or not to fire the coach. The index is based on the difference between the actual and expected results reflected by betting odds. We conclude that to ensure job preservation, the manager does not have to succeed—he just must not fail.     

Keeping a weather eye on prediction markets: The influence of environmental conditions on forecasting accuracy

Increasingly, prediction markets are being embraced as a mechanism for eliciting and aggregating dispersed information and providing a means of deriving probabilistic forecasts of future uncertain events. The efficient market hypothesis postulates that prediction market prices should incorporate all information that is relevant to the performances of the contracts traded. This paper shows that such may not be the case in relation to information regarding environmental factors such as the weather and atmospheric conditions. In the context of horserace betting markets, we demonstrate that even after the effects of these factors on the contestants (horses and jockeys) have been discounted, the accuracy of the probabilities derived from market prices is affected systematically by the prevailing weather and atmospheric conditions. We show that significantly better forecasts can be derived from prediction markets if we correct for this phenomenon, and that these improvements have substantial economic value.     

Fair bets and profitability in college football gambling

Efficient markets in college football are tested over a 25-year period, 1976–2000. the market in general is found to be efficient, but betting on underdogs of more than 28 points violates a fair bet. The strategy of betting home underdogs reveals stronger results. Home underdogs of more than seven points are found to reject the null hypotheses of a fair bet over the last 10 years of the sample, 1991–2000. Home underdogs of more than 28 points are found to reject the null of no profitability during the same time frame.     

Wage against the machine: A generalized deep-learning market test of dataset value

How can you tell whether a particular sports dataset really adds value, particularly with regard to betting effectiveness? The method introduced in this paper provides a way for any analyst in almost any sport to attempt to determine the additional value of almost any dataset. It relies on the use of deep learning, comprehensive historical box score statistics, and the existence of betting markets. When the method is applied as an illustration to a novel dataset for the NBA, it is shown to provide more information than regular box score statistics alone, and appears to generate above-breakeven wagering profits.     

Informational efficiency and behaviour within in-play prediction markets

Studies of financial market informational efficiency have proven burdensome in practice, because it is difficult to pinpoint when news breaks and is known by some or all the participants. We overcome this by designing a framework to detect mispricing, test informational efficiency and evaluate the behavioural biases within high-frequency prediction markets. We demonstrate this using betting exchange data for association football, exploiting the moment when the first goal is scored in a match as major news that breaks cleanly. There are pre-match and in-play mispricing and inefficiency in these markets, explained by reverse favourite-longshot bias (favourite bias). The mispricing tends to increase when the major news is a surprise, such as a goal scored by a longshot team late in a match, with the market underestimating their chances of going on to win These results suggest that, even in prediction markets with large crowds of participants trading state-contingent claims, significant informational inefficiency and behavioural biases can be reflected in prices.     

The state of research on markets for sports betting and suggested future directions

Studies of markets for sports betting can be a rich source of knowledge on the process of price formation and the information content of market prices. But recent research in this field examines questions of a technical nature, questions of interest mostly to active participants in the literature. A change in direction, motivated by creative use of the efficiency hypothesis, may deliver insights that would be valuable to the profession in general. Some preliminary analyses along these lines are presented in the hope of stimulating new lines of inquiry in the field.     

How tournament incentives affect asset markets: A comparison between winner-take-all tournaments and elimination contests

We investigate the impact of investment managers׳ tournament incentives on investment strategies and market efficiency, distinguishing between winner-take-all tournaments (WTA), where a minority wins, and elimination contests (EC), where a majority wins. Theoretically, we show that investment managers play heterogeneous strategies in WTA and homogeneous strategies in EC, and markets are more prone to mispricing in WTA than in EC. Experimentally, we find that investment managers play more heterogeneous strategies in WTA than in EC, but this does not trigger significant differences in prices. Moreover, prices in WTA and EC do not differ significantly from markets composed of linearly incentivized subjects.