“Hot arms†and the “hot hand†: bettor and sportsbook reaction to team and pitcher streaks in Major League Baseball

A significant strand of literature on sports betting investigates how bettors and betting markets respond to winning streaks by players or teams. This literature began with basketball and refers to the ‘hot hand’ effect of in-form players and teams which suggests that bettors and/or bookmakers believe this streak will continue. Do gamblers benefit from backing a player or team that is on a winning streak or would they gain superior returns by assuming that the streak will end in the next game? In this chapter the authors test the ‘hot hand’ hypothesis in betting on Major League Baseball games. Interestingly, they find different results for bets based on the momentum of the team and on individual pitchers. Their results show that the baseball betting market believes in the ‘hot hand’ and there is potential for positive returns for gamblers when betting that a team’s hitting streak will end i.e. bettors would benefit from pursuing a ‘contrarian’ strategy. In contrast, wagering on pitchers with successful streaks delivers superior returns to bets against the streak.