Inefficient Forecasts at the Sportsbook: An Analysis of Real-Time Betting Line Movement

References

• Andrikogiannopoulou A, Papakonstantinou F (2018) Individual reaction to past performance sequences: Evidence from a real marketplace. Management Sci. 64(4):1957–1973.Link, Google Scholar
• Arkes HR (1991) Costs and benefits of judgment errors: Implications for debiasing. Psych. Bull. 110(3):486–498.Crossref, Google Scholar
• Arrow KJ, Forsythe R, Gorham M, Hahn R, Hanson R, Ledyard JO, Levmore S, et al. (2008) The promise of prediction markets. Science 320(5878):877–878.Crossref, Google Scholar
• Atanasov P, Rescober P, Stone E, Swift SA, Servan-Schreiber E, Tetlock P, Ungar L, Mellers B (2017) Distilling the wisdom of crowds: Prediction markets vs. prediction polls. Management Sci. 63(3):691–706.Link, Google Scholar
• Bar-Eli M, Azar OH, Ritov I, Keidar-Levin Y, Schein G (2007) Action bias among elite soccer goalkeepers: The case of penalty kicks. J. Econom. Psych. 28(5):606–621.Crossref, Google Scholar
• Bar-Hillel M (1980) The base-rate fallacy in probability judgments. Acta Psych. 44(3):211–233.Crossref, Google Scholar
• Barberis N, Shleifer A, Vishny R (1998) A model of investor sentiment. J. Financial Econom. 49(3):307–343.Crossref, Google Scholar
• Bennett RW (2021) Next game reaction to mispriced betting lines in college football. Appl. Econom. Lett. 28(12):1006–1009.Crossref, Google Scholar
• Berkowitz JP, Depken CA, Gandar JM (2018) The conversion of money lines into win probabilities: Reconciliations and simplifications. J. Sports Econom. 19(7):990–1015.Crossref, Google Scholar
• Bickel JE, Kim SD (2014) Re-examining the efficiency of the Major League Baseball over-under betting market. Appl. Financial Econom. 24(18):1229–1234.Crossref, Google Scholar
• Bowman RA, Ashman T, Lambrinos J (2013) Prospective measures of competitive balance: Application to money lines in Major League Baseball. Appl. Econom. 45(29):4071–4081.Crossref, Google Scholar
• Brier GW (1950) Verification of forecasts expressed in terms of probability. Monthly Weather Rev. 78(1):1–3.Crossref, Google Scholar
• Brown KH, Abraham FJ (2002) Testing market efficiency in the Major League Baseball over-under betting market. J. Sports Econom. 3(4):311–319.Crossref, Google Scholar
• Can E, Nichols MW (2022) The income elasticity of gross sports betting revenues in Nevada: Short-run and long-run estimates. J. Sports Econom. 23(2):175–199.Crossref, Google Scholar
• Charles A, Darné O (2009) Variance-ratio tests of random walk: An overview. J. Econom. Surveys 23(3):503–527.Crossref, Google Scholar
• Conrad J, Kaul G (1988) Time-variation in expected returns. J. Bus. 61(4):409–425.Crossref, Google Scholar
• Cutler DM, Poterba JM, Summers LH (1991) Speculative dynamics. Rev. Econom. Stud. 58(3):529–546.Crossref, Google Scholar
• Dana JD, Knetter MM (1994) Learning and efficiency in a gambling market. Management Sci. 40(10):1317–1328.Link, Google Scholar
• Dare WH, Dennis SA, Paul RJ (2015) Player absence and betting lines in the NBA. Finance Res. Lett. 13:130–136.Crossref, Google Scholar
• De Bondt WF, Thaler R (1985) Does the stock market overreact? J. Finance 40(3):793–805.Crossref, Google Scholar
• De Finetti B (1962) Does it make sense to speak of “good probability appraisers.” Good IJ, Mayne AJ, Smith JM, eds. The Scientist Speculates: An Anthology of Partly-Baked Ideas (Wiley, New York), 357–364.Google Scholar
• Drèze X, Nunes JC (2004) Using combined-currency prices to lower consumers’ perceived cost. J. Marketing Res. 41(1):59–72.Crossref, Google Scholar
• Durand RB, Patterson FM, Shank CA (2021) Behavioral biases in the NFL gambling market: Overreaction to news and the recency bias. J. Behav. Experiment. Finance 31:100522.Crossref, Google Scholar
• Estelami H (2003) The effect of price presentation tactics on consumer evaluation effort of multi-dimensional prices. J. Marketing Theory Practice 11(2):1–16.Crossref, Google Scholar
• Fama EF (1970) Efficient capital markets: A review of theory and empirical work. J. Finance 25(2):383–417.Crossref, Google Scholar
• Fama EF, French KR (1988) Permanent and temporary components of stock prices. J. Political Econom. 96(2):246–273.Crossref, Google Scholar
• FanDuel (2023) Personal communication with the author. Risk and Trading Department.Google Scholar
• Fischhoff B (1982) Debiasing. Kahneman D, Slovic P, Tversky A, eds. Judgment Under Uncertainty: Heuristics and Biases (Cambridge University Press, Cambridge, MA), 422–444.Google Scholar
• Friedman D (1983) Effective scoring rules for probabilistic forecasts. Management. Sci. 29(4):447–454.Link, Google Scholar
• Gandar JM, Dare WH, Brown CR, Zuber RA (1998) Informed traders and price variations in the betting market for professional basketball games. J. Finance 53(1):385–401.Crossref, Google Scholar
• Gandar JM, Zuber RA, Johnson RS, Dare W (2002) Re-examining the betting market on Major League Baseball games: Is there a reverse favourite-longshot bias? Appl. Econom. 34(10):1309–1317.Crossref, Google Scholar
• Gneiting T, Raftery AE (2007) Strictly proper scoring rules, prediction, and estimation. J. Amer. Statist. Assoc. 102(477):359–378.Crossref, Google Scholar
• Grand View Research (2021) Sports betting market size, share & trends analysis report by platform (online, offline), by type (fixed odds wagering, eSports betting), by sports type (football, basketball), by region, and segment forecasts, 2021–2028. Accessed January 22, 2022, https://www.grandviewresearch.com/industry-analysis/sports-betting-market-report.Google Scholar
• Green E, Lee H, Rothschild DM (2020) The favorite-longshot Midas. Working paper, Jacobs Levy Equity Management Center for Quantitative Financial Research, Wharton School, University of Pennsylvania.Google Scholar
• Huang BN (1995) Do Asian stock market prices follow random walks? Evidence from the variance ratio test. Appl. Financial Econom. 5(4):251–256.Crossref, Google Scholar
• Jose VRR, Nau RF, Winkler RL (2008) Scoring rules, generalized entropy, and utility maximization. Oper. Res. 56(5):1146–1157.Link, Google Scholar
• Kahneman D, Tversky A (1972) Subjective probability: A judgment of representativeness. Cognitive Psych. 3(3):430–454.Crossref, Google Scholar
• Kain KJ, Logan TD (2014) Are sports betting markets prediction markets? Evidence from a new test. J. Sports Econom. 15(1):45–63.Crossref, Google Scholar
• Lahiri K, Wang JG (2013) Evaluating probability forecasts for GDP declines using alternative methodologies. Internat. J. Forecast. 29(1):175–190.Crossref, Google Scholar
• Larrick RP, Soll JB (2008) The MPG illusion. Science 320(5883):1593–1594.Crossref, Google Scholar
• Larson RB (2014) Psychological pricing principles for organizations with market power. J. Appl. Bus. Econom. 16(1):11–25.Google Scholar
• Levitt SD (2004) Why are gambling markets organised so differently from financial markets? Econom. J. 114(495):223–246.Google Scholar
• Lichtenstein S, Fischhoff B (1980) Training for calibration. Organ. Behav. Human Performance 26(2):149–171.Crossref, Google Scholar
• Liu CY, He J (1991) A variance-ratio test of random walks in foreign exchange rates. J. Finance 46(2):773–785.Google Scholar
• Lo AW, MacKinlay AC (1988) Stock market prices do not follow random walks: Evidence from a simple specification test. Rev. Financial Stud. 1(1):41–66.Crossref, Google Scholar
• Manski CF (2006) Interpreting the predictions of prediction markets. Econom. Lett. 91(3):425–429.Crossref, Google Scholar
• Miller E, Davidow M (2019) The Logic of Sports Betting (Kanab Tech, LLC, Carson City, NV).Google Scholar
• Miller TW Jr, Rapach DE (2013) An intra-week efficiency analysis of bookie-quoted NFL betting lines in NYC. J. Empirical Finance 24:10–23.Crossref, Google Scholar
• Morewedge CK, Tang S, Larrick RP (2018) Betting your favorite to win: Costly reluctance to hedge desired outcomes. Management Sci. 64(3):997–1014.Link, Google Scholar
• Moskowitz TJ (2021) Asset pricing and sports betting. J. Finance 76(6):3153–3209.Crossref, Google Scholar
• Murphy AH, Winkler RL (1970) Scoring rules in probability assessment and evaluation. Acta Psych. 34:273–286.Crossref, Google Scholar
• Nordhaus WD (1987) Forecasting efficiency: Concepts and applications. Rev. Econom. Statist. 69(4):667–674.Crossref, Google Scholar
• Oxford Analytica (2022) US states see sports betting as new revenue source. Emerald Expert Briefings (oxan-db).Google Scholar
• Patt A, Zeckhauser R (2000) Action bias and environmental decisions. J. Risk Uncertainty 21(1):45–72.Crossref, Google Scholar
• Paul RJ, Weinbach AP (2004) Testing market efficiency in the Major League Baseball over-under betting market. J. Sports Econom. 5(1):93–95.Crossref, Google Scholar
• Paul RJ, Weinbach AP (2007) Does sportsbook.com set pointspreads to maximize profits? J. Prediction Markets 1(3):209–218.Crossref, Google Scholar
• Paul RJ, Weinbach AP (2008) Price setting in the NBA gambling market: Tests of the Levitt model of sportsbook behavior. Internat. J. Sport Finance 3(3):137–145.Google Scholar
• Paul R, Weinbach AP, Borghesi R, Wilson M (2008) Using betting market odds to measure the uncertainty of outcome in Major League Baseball. Internat. J. Sport Finance 4(4):255–263.Google Scholar
• Peine K, Heitmann M, Herrmann A (2009) Getting a feel for price affect: A conceptual framework and empirical investigation of consumers’ emotional responses to price information. Psych. Marketing 26(1):39–66.Crossref, Google Scholar
• Poterba JM, Summers LH (1988) Mean reversion in stock prices: Evidence and implications. J. Financial Econom. 22(1):27–59.Crossref, Google Scholar
• Prelec D (1998) The probability weighting function. Econometrica 66(3):497–527.Crossref, Google Scholar
• Rascher DA (1999) A test of the optimal positive production network externality in Major League Baseball. Fizel JL, Gustafson E, Hadley L, eds. Sports, Economics: Current Research, 27–48.Google Scholar
• Regnier E (2018) Probability forecasts made at multiple lead times. Management Sci. 64(5):2407–2426.Link, Google Scholar
• Samuelson PA (1965) Proof that properly anticipated prices fluctuate randomly. Indust. Management Rev. 6(2):41–49.Google Scholar
• Sauer RD (2005) The state of research on markets for sports betting and suggested future directions. J. Econom. Finance 29(3):416–426.Crossref, Google Scholar
• Savage LJ (1971) Elicitation of personal probabilities and expectations. J. Amer. Statist. Assoc. 66(336):783–801.Crossref, Google Scholar
• Schnytzer A, Weinberg G (2008) Testing for home team and favorite biases in the Australian rules football fixed-odds and point spread betting markets. J. Sports Econom. 9(2):173–190.Crossref, Google Scholar
• Seillier-Moiseiwitsch F, Dawid A (1993) On testing the validity of sequential probability forecasts. J. Amer. Statist. Assoc. 88(421):355–359.Crossref, Google Scholar
• Selten R (1998) Axiomatic characterization of the quadratic scoring rule. Experiment. Econom. 1(1):43–61.Crossref, Google Scholar
• Seybert N, Bloomfield R (2009) Contagion of wishful thinking in markets. Management Sci. 55(5):738–751.Link, Google Scholar
• Shank CA (2018) Is the NFL betting market still inefficient? J. Econom. Finance 42(4):818–827.Crossref, Google Scholar
• Sinkey M, Logan T (2014) Does the hot hand drive the market? Evidence from college football betting markets. Eastern Econom. J. 40(4):583–603.Crossref, Google Scholar
• Smith G, Ryoo HJ (2003) Variance ratio tests of the random walk hypothesis for European emerging stock markets. Eur. J. Finance 9(3):290–300.Crossref, Google Scholar
• Summers LH (1986) Does the stock market rationally reflect fundamental values? J. Finance 41(3):591–601.Crossref, Google Scholar
• Swartz M (2009) Home-field advantage. Baseball Res. J. 38(2):31–47.Google Scholar
• Vergin RC, Sosik JJ (1999) No place like home: An examination of the home field advantage in gambling strategies in NFL football. J. Econom. Bus. 51(1):21–31.Crossref, Google Scholar
• Wever S, Aadland D (2012) Herd behaviour and underdogs in the NFL. Appl. Econom. Lett. 19(1):93–97.Crossref, Google Scholar
• Winkler RL (1967) The quantification of judgment: Some methodological suggestions. J. Amer. Statist. Assoc. 62(320):1105–1120.Crossref, Google Scholar
• Wolfers J, Zitzewitz E (2004) Prediction markets. J. Econom. Perspect. 18(2):107–126.Crossref, Google Scholar
• Woodland LM, Woodland BM (1994) Market efficiency and the favorite-longshot bias: The baseball betting market. J. Finance 49(1):269–279.Crossref, Google Scholar
• Wu G, Gonzalez R (1996) Curvature of the probability weighting function. Management Sci. 42(12):1676–1690.Link, Google Scholar
• Zion Market Research (2021) Sports betting market—By platform (online and offline), by type (line-in-play, fixed old betting, exchange betting, daily fantasy, spread betting, e-sports, pari-mutuel, and others), and by sports type (football, baseball, basketball, hockey, cricket, tennis, golf, boxing, horse riding, auto racing, and others): Global industry perspective, comprehensive analysis, and forecast, 2021–2028. Accessed January 22, 2022, https://www.zionmarketresearch.com/report/sports-betting-market.Google Scholar