Market Efficiency and the Favorite-Longshot Bias: The Baseball Betting Market

This paper examines the efficiency of the legal gambling market for major league baseball. Weak-form tests of market efficiency within and across odds lines are performed. Surprisingly, the consistently observed favorite-longshot bias in racetrack betting is shown to exist in reverse for baseball bettors. However, these and other deviations from efficiency are shown to be insufficient to allow for profitable betting strategies when commissions are considered.