Academic journal article Journal of Economics and Finance

Additional Evidence of Heuristic-Based Inefficiency in Season Wins Total Betting Markets: Major League Baseball

Academic journal article Journal of Economics and Finance

Additional Evidence of Heuristic-Based Inefficiency in Season Wins Total Betting Markets: Major League Baseball

Article excerpt

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1 Introduction

This research represents the first investigation of the Major League Baseball season wins total over/under betting market (MLB-WT). The market differs from spread bets on individual games in that there is no designated favorite or underdog team. Many of the theories that have attempted to explain the market inefficiencies in sports and racetrack betting markets are dependent on this designation. The first evidence of the favorite-longshot bias dates back to Griffith (1949), where it was observed that wagers on favorite horses at the racetrack have higher average returns relative to bets on longshots. Woodland and Woodland (1994) first reported the reverse-favorite longshot bias, that is, underdogs or longshots are relatively good wagers compared to bets on favorites. Although the initial finding was for betting on individual games in Major League Baseball betting market, authors have identified the presence of this reverse bias in several other sports. The documentation of inefficiencies and profitability in markets without favorites or longshots teams is noteworthy.

Although market inefficiencies are not uncommon in sports betting markets, few are sufficient to offer bettors the opportunity for profitable wagers. Woodland and Woodland (2013, 2015) found significant inefficiencies and profitability for both the NFL and NBA season wins totals markets (NFL-WT and NBA-WT) using heuristics as motivation for observed bettor preferences. If betting biases are the result of bettors' heuristics, then betting strategies can be developed to capitalize on them. This paper applies these heuristic-based rules to the MLB-WT. In contrast to the NFL-WT, where the moneyline or odds results in skewed returns, the MLB-WT employs the same evenmoney wager as the NBA-WT. Consequently, the risk attitudes of bettors is not a rationale for any documented biases.

The paper is organized as follows. Section two discusses the season wins total market in the MLB. Betting rules are described in section three. Results and comparisons to the returns for the NFL-WT and NBA-WT are contained in section four. Concluding remarks are in section five.

2 The MLB season wins total betting market

Data for this betting market are relatively difficult to obtain. This paper analyzes eight baseball seasons from 2006 through 2013. Four years represent lines from two, major online-betting services, Pinnacle and BoDog, while the remaining four seasons are lines posted by LVH, originally the Las Vegas Hilton and later the Las Vegas Hotel.

In the current era, a professional baseball season consists of 162 regular-season games. For the time period examined, there were thirty teams in the league. Weather may prevent all games from being played, particularly for teams who are not in playoff contention. As a result, sportsbooks typically impose a minimum of 160 completed games or the bet is void and all wagers are returned. This did not occur in our data set. For the eight seasons, there were twelve instances when teams played only 161 games. In addition, there were eight teams that played 163 games, with the extra game determining playoff eligibility. Neither of these situations impacted the bet outcome. In every other circumstance, the full season of 162 games was played.

The season wins totals betting market for MLB is structured as follows. As an example, the Las Vegas Hotel could post for following wins total line, WTL, for the Los Angeles Dodgers.

In this market, the B11 for 10^ rule (20-cent line) is utilized, the standard for football and basketball spread and totals wagers. The participant either bets $11 to win $10 on the under bet, that the Dodgers will win at most 92 games, or they purchase the over wager, that the Dodgers will win at least 94 games. If the Dodgers win exactly 93 games, the bet is a push, all money is refunded and no commissions are collected. …

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