Academic journal article Atlantic Economic Journal

Pricing Inefficiencies in the Football-Betting Market

Academic journal article Atlantic Economic Journal

Pricing Inefficiencies in the Football-Betting Market

Article excerpt

Since Pankoff [Journal of Business, 1968], investment writers have recognized that bets on the outcome of football games provide an unusually direct test of pricing efficiency by market consensus. In a football context, prices are proxied by pointspreads values ranging from 1 to 50+, which represent the bettors' expectations regarding the stronger team's victory margin). Efficiency refers to the impossibility of using betting rules based on past performance or information not discounted by the spread to win consistently.

Past studies have generally found no significant profits (or losses) resulting from any betting strategies tested. Exceptions failed to remain profitable and nonrandom outside their respective samples. However, to infer that the football-betting market is efficient would be premature since no study has examined the pointwise results of "over-under" bets.

Most football games are assigned two lines: one is the pointspread defined above, while the second represents the market's estimate of the total points scored by both teams. Bettors can choose to bet a game over or under the designated total. Games pitting clubs with strong defenses can have an over-under line as low as 30. Two offense-minded teams may be given an over-under as high as 60.

Over-under results for the 28 teams in the National Football League were analyzed over the 1986-90 seasons and partitioned by role (favorite or underdog), site (home or away), and month (September through December). …

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