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Informed Traders and Price Variations in the Betting Market for Professional Basketball Games

Author

Listed:
  • John M. Gandar

    (University of North Carolina at Charlotte and Massey University, New Zealand,)

  • William H. Dare

    (Southwest Texas State University,)

  • Craig R. Brown

    (Ernst and Young, Chicago,)

  • Richard A. Zuber

    (University of North Carolina at Charlotte)

Abstract

This paper examines betting line changes from the opening to the closing of the point spread betting market on National Basketball Association games for evidence of informed trader betting. We show that within-betting period line changes significantly improve the accuracy of betting lines as forecasts of game outcomes. We examine individual line change magnitudes and show that these are directly and proportionately related to biases in opening lines. Further, line changes are of sufficient magnitude to remove these biases by the close of betting. We interpret these results as evidence that informed traders are influential in this market. Copyright The American Finance Association 1998.

Suggested Citation

  • John M. Gandar & William H. Dare & Craig R. Brown & Richard A. Zuber, 1998. "Informed Traders and Price Variations in the Betting Market for Professional Basketball Games," Journal of Finance, American Finance Association, vol. 53(1), pages 385-401, February.
    • Handle: RePEc:bla:jfinan:v:53:y:1998:i:1:p:385-401
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