Regional information and market efficiency: the case of spread betting in United States college football |
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Authors: | Daniel D Kuester Shane Sanders |
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Institution: | (1) Department of Economics, Kansas State University, Manhattan, KS, USA;(2) Department of Economics, Nicholls State University, Thibodaux, LA, USA |
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Abstract: | 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. |
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