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Sports forecasting: a comparison of the forecast accuracy of prediction markets, betting odds and tipsters

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Author Info
Martin Spann (School of Business and Economics, University of Passau, Germany)
Bernd Skiera (School of Business and Economics, Johann Wolfgang Goethe-University, Frankfurt am Main, Germany)

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Abstract

This article compares the forecast accuracy of different methods, namely prediction markets, tipsters and betting odds, and assesses the ability of prediction markets and tipsters to generate profits systematically in a betting market. We present the results of an empirical study that uses data from 678-837 games of three seasons of the German premier soccer league. Prediction markets and betting odds perform equally well in terms of forecasting accuracy, but both methods strongly outperform tipsters. A weighting-based combination of the forecasts of these methods leads to a slightly higher forecast accuracy, whereas a rule-based combination improves forecast accuracy substantially. However, none of the forecasts leads to systematic monetary gains in betting markets because of the high fees (25%) charged by the state-owned bookmaker in Germany. Lower fees (e.g., approximately 12% or 0%) would provide systematic profits if punters exploited the information from prediction markets and bet only on a selected number of games. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1091
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 28 (2009)
Issue (Month): 1 ()
Pages: 55-72
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Handle: RePEc:jof:jforec:v:28:y:2009:i:1:p:55-72

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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  1. Egon Franck & Erwin Verbeek & Stephan NŸesch, 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. [Downloadable!]
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This page was last updated on 2009-11-1.

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