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Chance or Ability? The Efficiency of the Football Betting Market Revisited

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  • Rebeggiani, Luca
  • Gross, Johannes

Abstract

The extent of market efficiency induced by rational behaviour of market participants is central for economic research. Many economists have already examined sports-betting markets as a laboratory to better understand trading behaviour and efficiency of stock prices while avoiding to jointly test the hypothesis of a correct capital market model. The following paper will investigate whether the European football betting market fulfils the efficiency paradigm introduced by Fama (1970) with a unique dataset allowing for an investigation of the German betting market in view of its regulatory changes recently. The analysis contributes to the literature by conducting a variety of empirical strategy including rational expectation frameworks and an ordered choice model to stress the ex post market performance from a weak and semi-strong form perspective. In view of existing market distortions as taxes, switching costs of changing betting providers and limitation in competition, the results of the analysis are indicative of a rational market equilibrium surprisingly close to the efficiency benchmark.1

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  • Rebeggiani, Luca & Gross, Johannes, 2018. "Chance or Ability? The Efficiency of the Football Betting Market Revisited," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181563, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc18:181563
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    More about this item

    Keywords

    Gambling; Sports Betting; Market Efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z2 - Other Special Topics - - Sports Economics

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