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Does Sportsbook.com Set Pointspreads to Maximize Profits? Tests of the Levitt Model of Sportsbook Behavior

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Author Info

  • Rodney J. Paul
  • Andrew P. Weinbach

Abstract

The Levitt (2004) model of sportsbook behavior is tested using actual percentages of dollars bet on NFL games from the internet sportsbook, Sportsbook.com. Simple regression results suggest that Sportsbook.com sets pointspreads (prices) to maximize profits, as the Levitt model assumes, not to balance the betting dollars, as the traditional model of sportsbook behavior assumes. Sportsbook.com is found to accept significantly more wagering dollars on road favorites, larger favorites, and on the over for the highest totals in the over/under betting market. Bettor liquidity constraints and sportsbook betting limits may help explain this result.

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Bibliographic Info

Article provided by University of Buckingham Press in its journal Journal of Prediction Markets.

Volume (Year): 1 (2007)
Issue (Month): 3 (December)
Pages: 209-218

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Handle: RePEc:buc:jpredm:v:1:y:2007:i:3:p:209-218

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Web: http://www.predictionmarketjournal.com/index_files/Page418.htm

Related research

Keywords: EFFICIENT MARKETS; GAMBLING; SPORTS;

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Cited by:
  1. Humphreys, Brad R. & Paul, Rodney J. & Weinbach, Andrew P., 2013. "Consumption benefits and gambling: Evidence from the NCAA basketball betting market," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 376-386.
  2. Rodney J. Paul & Andrew P. Weinbach, 2014. "Market Efficiency and Behavioral Biases in the WNBA Betting Market," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 2(2), pages 193-202, April.
  3. 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.
  4. Humphreys, Brad, 2010. "Prices, Point Spreads and Profits: Evidence from the National Football League," Working Papers 2010-5, University of Alberta, Department of Economics.
  5. Krieger, Kevin & Fodor, Andy, 2013. "Price movements and the prevalence of informed traders: The case of line movement in college basketball," Journal of Economics and Business, Elsevier, vol. 68(C), pages 70-82.
  6. 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.
  7. Humphreys, Brad & Paul, Rodney & Weinbach, Andrew, 2011. "CEO Turnover: More Evidence on the Role of Performance Expectations," Working Papers 2011-14, University of Alberta, Department of Economics.
  8. Babatunde Buraimo & David Peel & Rob Simmons, 2013. "Systematic Positive Expected Returns in the UK Fixed Odds Betting Market: An Analysis of the Fink Tank Predictions," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(4), pages 168-182, December.

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