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Market Efficiency and a Profitable Betting Rule

Author

Listed:
  • Rodney J. Paul

    (Saint Bonaventure University)

  • Andrew P. Weinbach

    (Clemson University)

Abstract

This article presents empirical tests of efficient markets on the professional football market for totals from 1979 through 2000. The forecast errors in the totals market were found to be skewed, so a test of a fair bet on National Football League totals was performed using a log likelihood ratio test as suggested by Evan and Noble. The under on the total is a winning proposition more than 50% of the time, but a fair bet cannot be rejected. A betting rule that looks at totals in the high end of the totals distribution and takes a contrarian strategy of betting unders for games that are 7,6, or 5 points above the mean is shown to violate a fair bet. Rejection of no profitability, when incorporating the take of the sportsbook, is also rejected for the highest of the totals.

Suggested Citation

  • Rodney J. Paul & Andrew P. Weinbach, 2002. "Market Efficiency and a Profitable Betting Rule," Journal of Sports Economics, , vol. 3(3), pages 256-263, August.
    • Handle: RePEc:sae:jospec:v:3:y:2002:i:3:p:256-263
    DOI: 10.1177/1527002502003003003
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    References listed on IDEAS

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    1. Linda M. Woodland & Bill M. Woodland, 2001. "Market Efficiency and Profitable Wagering in the National Hockey League: Can Bettors Score on Longshots?," Southern Economic Journal, John Wiley & Sons, vol. 67(4), pages 983-995, April.
    2. Woodland, Linda M & Woodland, Bill M, 1994. "Market Efficiency and the Favorite-Longshot Bias: The Baseball Betting Market," Journal of Finance, American Finance Association, vol. 49(1), pages 269-279, March.
    3. Sauer, Raymond D & Brajer, Vic & Ferris, Stephen P & Marr, M Wayne, 1988. "Hold Your Bets: Another Look at the Efficiency of the Gambling Market for National Football League Games: Comment," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 206-213, February.
    4. repec:bla:jfinan:v:43:y:1988:i:4:p:995-1008 is not listed on IDEAS
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    1. Andrew Weinbach & Rodney J. Paul, 2009. "National television coverage and the behavioural bias of bettors: the American college football totals market," International Gambling Studies, Taylor & Francis Journals, vol. 9(1), pages 55-66, April.
    2. Linda M. Woodland & Bill M. Woodland, 2015. "The National Football League season wins total betting market: The impact of heuristics on behavior," Southern Economic Journal, John Wiley & Sons, vol. 82(1), pages 38-54, July.
    3. Paul, Rodney J. & Weinbach, Andrew P. & Wilson, Mark, 2004. "Efficient markets, fair bets, and profitability in NBA totals 1995-96 to 2001-02," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(4), pages 624-632, September.
    4. Rodney Paul & Andrew Weinbach, 2005. "Bettor preferences and market efficiency in football totals markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(3), pages 409-415, September.
    5. Richard Borghesi, 2008. "Weather biases in the NFL totals market," Applied Financial Economics, Taylor & Francis Journals, vol. 18(12), pages 947-953.
    6. Raphael Flepp & Stephan Nüesch & Egon Franck, 2016. "Does Bettor Sentiment Affect Bookmaker Pricing?," Journal of Sports Economics, , vol. 17(1), pages 3-11, January.
    7. Corey A. Shank, 2018. "Is the NFL betting market still inefficient?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(4), pages 818-827, October.
    8. Rodney J. Paul & Andrew P. Weinbach, 2009. "Sportsbook Behavior in the NCAA Football Betting Market: Tests of the Traditional and Levitt Models of Sportsbook Behavior," Journal of Prediction Markets, University of Buckingham Press, vol. 3(2), pages 21-37, August.
    9. Corey A. Shank, 2019. "NFL betting market efficiency, divisional rivals, and profitable strategies," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 36(4), pages 567-580, September.
    10. Michael DiFilippo & Kevin Krieger & Justin Davis & Andy Fodor, 2014. "Early Season NFL Over/Under Bias," Journal of Sports Economics, , vol. 15(2), pages 201-211, April.
    11. Rodney Paul & Andrew Weinbach, 2011. "NFL bettor biases and price setting: further tests of the Levitt hypothesis of sportsbook behaviour," Applied Economics Letters, Taylor & Francis Journals, vol. 18(2), pages 193-197.
    12. Rodney J Paul & Andrew Weinbach, 2012. "Wagering Preferences Of Nfl Bettors: Determinants Of Betting Volume," Journal of Prediction Markets, University of Buckingham Press, vol. 6(1), pages 42-55.
    13. Paul, Rodney J. & Weinbach, Andrew P., 2007. "The uncertainty of outcome and scoring effects on Nielsen ratings for Monday Night Football," Journal of Economics and Business, Elsevier, vol. 59(3), pages 199-211.
    14. Steven Salaga & Scott Tainsky, 2015. "The Effects of Outcome Uncertainty, Scoring, and Pregame Expectations on Nielsen Ratings for Bowl Championship Series Games," Journal of Sports Economics, , vol. 16(5), pages 439-459, June.
    15. Rodney J. Paul & Andrew P. Weinbach, 2005. "Bettor Misperceptions in the NBA," Journal of Sports Economics, , vol. 6(4), pages 390-400, November.
    16. Kyle J. Kain & Trevon D. Logan, 2014. "Are Sports Betting Markets Prediction Markets?," Journal of Sports Economics, , vol. 15(1), pages 45-63, February.

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