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Prediction Accuracy of Different Market Structures – Bookmakers versus a Betting Exchange

Author

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  • Egon Franck

    (Institute for Strategy and Business Economics, University of Zurich)

  • Erwin Verbeek

    (Institute for Strategy and Business Economics, University of Zurich)

  • Stephan Nüesch

    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

There is a well-established literature on separately testing the prediction power of different betting market settings. This paper provides an inter-market comparison of the forecasting accuracy between bookmakers and a major betting exchange. Employing a dataset covering all football matches played in the major leagues of the “Big Five” (England, France, Germany, Italy, Spain) during three seasons (5478 games in total), we find evidence that the betting exchange provides more accurate predictions of the same underlying event than bookmakers. A simple betting strategy of selecting bets for which bookmakers offer lower probabilities(higher odds) than the bet exchange generates above average and, in some cases, even positive returns.

Suggested Citation

  • Egon Franck & Erwin Verbeek & Stephan Nüesch, 2008. "Prediction Accuracy of Different Market Structures – Bookmakers versus a Betting Exchange," Working Papers 0096, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2009.
    • Handle: RePEc:iso:wpaper:0096
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    References listed on IDEAS

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    1. repec:reg:rpubli:259 is not listed on IDEAS
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    Keywords

    Nprediction accuracy; betting; bookmaker; betting exchange; probit regression;
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