Prices, Point Spreads and Profits: Evidence from the National Football League
AbstractPrevious research on point spread betting assumed that bookmakers attract an equal volume of bets on either side of games in order to maximize profits. This paper examines the viability of this assumption from a theoretical and empirical perspective. The model of bookmaker behavior developed predicts that expected returns are not necessarily maximized when the volume of bets on each side of a game are equal. Analysis of a unique data set containing information on point spreads, game outcomes, and betting volume for the 2005-2008 NFL seasons reveals widespread imbalances in bet volumes. Simulations indicate that this imbalanced betting generated positive profits, including profits larger than would have been made if the betting volume was balanced on all games.
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Bibliographic InfoPaper provided by University of Alberta, Department of Economics in its series Working Papers with number 2010-5.
Length: 19 pages
Date of creation: 01 Feb 2010
Date of revision:
sports betting; balanced book model; NFL;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
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