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Overreaction in the NFL point spread market

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  • Roger Vergin

Abstract

A tendency for individuals to overweigh recent information and underweigh prior data has been discovered by researchers in financial markets, economic forecasting, security analysis and other areas. A study of point spread patterns in the 2264 regular season National Football League (NFL) games over the 1981-;1995 seasons was conducted to investigate the overreaction bias of bettors. Results indicated that bettors tend to overweigh outstanding positive performance when measured over the previous game, over the previous two to five games or over the previous season. In general, the more outstanding the performance, the greater the overreaction. However, bettors did not overreact to unusual negative performance over the same periods. This result is congruent with the tendency for heavy favourites to cover the point spread less than half the time over the 1969-;1995 seasons. The overreaction bias in the NFL betting market provides another example of a violation of the weak form of the Efficient Markets Hypothesis.

Suggested Citation

  • Roger Vergin, 2001. "Overreaction in the NFL point spread market," Applied Financial Economics, Taylor & Francis Journals, vol. 11(5), pages 497-509.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:5:p:497-509
    DOI: 10.1080/096031001752236780
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    3. Antonios Antoniou & Emilios C. C Galariotis & Spyros I. Spyrou, 2006. "The effect of time-varying risk on the profitability of contrarian investment strategies in a thinly traded market: a Kalman filter approach," Post-Print hal-01096031, HAL.
    4. Boubaker, Sabri & Farag, Hisham & Nguyen, Duc Khuong, 2015. "Short-term overreaction to specific events: Evidence from an emerging market," Research in International Business and Finance, Elsevier, vol. 35(C), pages 153-165.
    5. Matthew Amor & William Griffiths, 2003. "Modelling the Behaviour and Performance of Australian Football Tipsters," Department of Economics - Working Papers Series 871, The University of Melbourne.
    6. Andy Fodor & Michael DiFilippo & Kevin Krieger & Justin Davis, 2013. "Inefficient pricing from holdover bias in NFL point spread markets," Applied Financial Economics, Taylor & Francis Journals, vol. 23(17), pages 1407-1418, September.
    7. Borghesi, Richard & Dare, William, 2009. "A test of the widespread-point-shaving theory," Finance Research Letters, Elsevier, vol. 6(3), pages 115-121, September.
    8. Michels, Rouven & Ötting, Marius & Langrock, Roland, 2023. "Bettors’ reaction to match dynamics: Evidence from in-game betting," European Journal of Operational Research, Elsevier, vol. 310(3), pages 1118-1127.
    9. Isabel Abinzano & Luis Muga & Rafael Santamaria, 2017. "Behavioral Biases Never Walk Alone," Journal of Sports Economics, , vol. 18(2), pages 99-125, February.
    10. Vandenbruaene, Jonas & De Ceuster, Marc & Annaert, Jan, 2023. "Does time series momentum also exist outside traditional financial markets? Near-laboratory evidence from sports betting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).
    11. Caiado, Jorge & Vieira, Aníbal & Bonito, Ana & Reis, Carlos & Fernandes, Francisco, 2006. "Previsão da eficácia ofensiva do futebol profissional: Um caso Português," MPRA Paper 2185, University Library of Munich, Germany.
    12. Nofsinger, John R. & Shank, Corey A., 2023. "Momentum trading in the NFL gambling market," Finance Research Letters, Elsevier, vol. 55(PB).
    13. Stekler, H.O. & Sendor, David & Verlander, Richard, 2010. "Issues in sports forecasting," International Journal of Forecasting, Elsevier, vol. 26(3), pages 606-621, July.
      • Herman O. Stekler & David Sendor & Richard Verlander, 2009. "Issues in Sports Forecasting," Working Papers 2009-002, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    14. Richard Borghesi, 2008. "Weather biases in the NFL totals market," Applied Financial Economics, Taylor & Francis Journals, vol. 18(12), pages 947-953.
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    16. Mark David Witte & McDonald Paul Mirabile, 2010. "Not So Fast, My Friend: Biases in College Football Polls," Journal of Sports Economics, , vol. 11(4), pages 443-455, August.

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