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Is herding efficient? Evidence from the college football point spread market

Author

Listed:
  • Alexander Traugutt

    (Elon University)

  • Jarid Morton

    (Western Kentucky University)

Abstract

This study examined the efficiency of herd behavior in the college football point spread market during the 2020-21 season, which was significantly impacted by the coronavirus pandemic. The virus caused chaos throughout the sport, which featured empty stadiums, infectious outbreaks, and scheduling disruptions. These uncertainties created an information gap, particularly regarding player availability, for sports bettors who utilize these types of data to build their models. As such, this market coupled with the pandemic backdrop provides an optimal setting to test the efficiency of herd behavior. Results indicated that the market was statistically inefficient, and from a herding standpoint, contrarian strategies resulted in win percentages that exceeded 50% for various probability cutoffs. This research presents applicable findings related to psychological factors that influence investor behavior, which can be generalized to markets within and outside of sport.

Suggested Citation

  • Alexander Traugutt & Jarid Morton, 2022. "Is herding efficient? Evidence from the college football point spread market," Economics Bulletin, AccessEcon, vol. 42(3), pages 1673-1680.
    • Handle: RePEc:ebl:ecbull:eb-22-00065
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    herd behavior; market efficiency; college football; sports betting; pandemic;
    All these keywords.

    JEL classification:

    • L8 - Industrial Organization - - Industry Studies: Services
    • G1 - Financial Economics - - General Financial Markets

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