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Testing Market Efficiency: Evidence from the NFL Sports Betting Market

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  • Gray, Philip K
  • Gray, Stephen F
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    Abstract

    This article examines the efficiency of the National Football League betting market. The standard ordinary least squares regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows the authors to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In-sample tests indicate that probit-based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out-of-sample testing, there is some inconsistency among the remaining out-of-sample predictions. The authors' results also suggest that widely documented inefficiencies in this market tend to dissipate over time. Copyright 1997 by American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 52 (1997)
    Issue (Month): 4 (September)
    Pages: 1725-37
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    Handle: RePEc:bla:jfinan:v:52:y:1997:i:4:p:1725-37

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    For corrections or technical questions regarding this item, or to correct its listing, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

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    Cited by:
    1. Igan, Deniz & Pinheiro, Marcelo & Smith, John, 2011. ""White men can't jump," but would you bet on it?," MPRA Paper 31469, University Library of Munich, Germany.
    2. Rodney J. Paul & Andrew P. Weinbach & Kristin K. Paul, 2010. "Using Actual Betting Percentages to Analyze Sportsbook Behavior: The Canadian and Arena Football Leagues," New York Economic Review, New York State Economics Association (NYSEA), vol. 41(1), pages 35-44.
    3. David Johnstone, 2007. "Economic Darwinism: Who has the Best Probabilities?," Theory and Decision, Springer, vol. 62(1), pages 47-96, February.
    4. Daniel Kuester & Shane Sanders, 2011. "Regional information and market efficiency: the case of spread betting in United States college football," Journal of Economics and Finance, Springer, vol. 35(1), pages 116-122, January.
    5. Steven D. Levitt, 2003. "How Do Markets Function? An Empirical Analysis of Gambling on the National Football League," NBER Working Papers 9422, National Bureau of Economic Research, Inc.
    6. William Dare & A. Steven Holland, 2004. "Efficiency in the NFL betting market: modifying and consolidating research methods," Applied Economics, Taylor and Francis Journals, vol. 36(1), pages 9-15.
    7. C. Schmidt & A. Werwatz, . "How accurate do markets predict the outcome of an event? The Euro 2000 soccer championships experiment," Sonderforschungsbereich 373 2002-29, Humboldt Universitaet Berlin.
    8. 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.
    9. Mark Burkey, 2005. "On "Arbitage" and Market Efficiency: An Examination of NFL Wagering," New York Economic Review, New York State Economics Association (NYSEA), vol. 36(1), pages 13-28.
    10. Quitzau, Jörn & Vöpel, Henning, 2009. "Der Faktor Zufall im Fußball: Eine empirische Untersuchung für die Saison 2007/08," HWWI Research Papers 1-22, Hamburg Institute of International Economics (HWWI).
    11. 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.
    12. Igan, Deniz & Pinheiro, Marcelo & Smith, John, 2012. "Racial biases and market outcomes: "White men can't jump," but would you bet on it?," MPRA Paper 36069, University Library of Munich, Germany.
    13. Klaassen, F.J.G.M. & Magnus, J.R., 2006. "Are Economic Agents Successful Optimizers? An Analysis Through Strategy in Tennis," Discussion Paper 2006-52, Tilburg University, Center for Economic Research.

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