Egon Franck () (Institute for Strategy and Business Economics, University of Zurich) Erwin Verbeek () (Institute for Strategy and Business Economics, University of Zurich) Stephan NŸesch () (Institute for Strategy and Business Economics, University of Zurich)
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This paper investigates sentiment betting both theoretically and empirically. We model the profitable pricing decision of a bookmaker in the presence of both pricesensitive and price-insensitive sentiment bettors who derive extra utility by backing the team they support. Using unique betting volume data from a bet exchange market, we first test the validity of employing home attendance and press coverage as proxies of the amount of sentimental betting. Second, multivariate analysis of a sample of over 32,000 bets on English soccer games shows that bookmakers actively shade prices to attract betting volume evoked by sentiment. Bookmakers offer more favourable odds where fan support is comparably large. The sentiment bias has amplified recently as a reaction to the increased overall price elasticity and the greater share of price-sensitive sentiment bettors in online betting.
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Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number
0089.
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