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Price Setting in the NBA Gambling Market: Tests of the Levitt Model of Sportsbook Behavior

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Author Info

  • Rodney J. Paul

    ()
    (St. Bonaventure University)

  • Andrew P. Weinbach

    (Coastal Carolina University)

Abstract

Levitt (2004) suggested that sportsbooks do not set prices in the NFL to clear markets, as was commonly assumed, but set prices to maximize profits. This paper uses actual betting data from four sportsbooks to test the Levitt (2004) hypothesis in the NBA. For a sample of the 2004-05 to 2006-07 seasons, it is shown that favorites receive a disproportionate share of NBA pointspread bets. In addition, the percentage of bets the favorite receives increases with each additional point of the pointspread. In the totals market, it is shown that overs receive a much higher percentage of bets compared to unders and the percentage bet on the over increases with each point of the total. Unlike the NFL, however, taking a contrarian position and betting against public sentiment is not found to win more often than implied by efficiency.

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Bibliographic Info

Article provided by Fitness Information Technology in its journal International Journal of Sport Finance.

Volume (Year): 3 (2008)
Issue (Month): 3 (August)
Pages: 137-145

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Handle: RePEc:jsf:intjsf:v:3:y:2008:i:3:p:137-145

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Related research

Keywords: efficient markets; gambling; sportsbook;

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Cited by:
  1. Rodney Paul & Andrew Weinbach, 2012. "Sportsbook pricing and the behavioral biases of bettors in the NHL," Journal of Economics and Finance, Springer, vol. 36(1), pages 123-135, January.
  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. Arne Feddersen & Brad Humphreys & Brian Soebbing, 2013. "Sentiment Bias in National Basketball Association Betting," Working Papers 13-03, Department of Economics, West Virginia University.
  4. 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.
  5. 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.
  6. Humphreys, Brad, 2010. "Prices, Point Spreads and Profits: Evidence from the National Football League," Working Papers 2010-5, University of Alberta, Department of Economics.
  7. 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.

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