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Efficiency of football betting markets: the economic significance of trading strategies

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  • Philip Gray
  • Stephen F. Gray
  • Timothy Roche

Abstract

Prior studies of the Australian Rugby League betting market report a degree of predictability well in excess of that attributable to chance. However, two important recent changes in the structure of the market facilitate an unambiguous assessment of the statistical significance of predictability and the economic significance of returns to betting strategies. The present paper reexamines the efficiency of the Australian Rugby League betting market under the revised market structure. In addition, a set of measures of the economic significance of trading strategies are developed and implemented. Relative to prior studies, the out‐of‐sample success of the predictive model has diminished notably under the revised market structure; although a naïve strategy betting on home underdogs still performs significantly better than can be attributed to chance. Simulation experiments suggest that the documented level of predictability from several strategies generates economically significant returns.

Suggested Citation

  • Philip Gray & Stephen F. Gray & Timothy Roche, 2005. "Efficiency of football betting markets: the economic significance of trading strategies," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(2), pages 269-281, July.
    • Handle: RePEc:bla:acctfi:v:45:y:2005:i:2:p:269-281
    DOI: 10.1111/j.1467-629x.2004.00129.x
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    Cited by:

    1. Jinook Jeong & Jee Young Kim & Yoon Jae Ro, 2019. "On the efficiency of racetrack betting market: a new test for the favourite-longshot bias," Applied Economics, Taylor & Francis Journals, vol. 51(54), pages 5817-5828, November.

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