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Asset Pricing and Sports Betting

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  • TOBIAS J. MOSKOWITZ

Abstract

Sports betting markets offer a novel laboratory to test theories of cross‐sectional asset pricing anomalies. Two features of this market—no systematic risk and terminal values exogenous to betting activity—evade the joint hypothesis problem, allowing mispricing to be detected. Examining a large and diverse set of liquid betting contracts, I find strong evidence of momentum, consistent with delayed overreaction and inconsistent with underreaction and rational pricing. Returns are a fraction of those in financial markets and fail to overcome transactions costs, preventing arbitrage from eliminating them. An insight from betting also predicts value and momentum returns in U.S. equities.

Suggested Citation

  • Tobias J. Moskowitz, 2021. "Asset Pricing and Sports Betting," Journal of Finance, American Finance Association, vol. 76(6), pages 3153-3209, December.
  • Handle: RePEc:bla:jfinan:v:76:y:2021:i:6:p:3153-3209
    DOI: 10.1111/jofi.13082
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    5. Dertwinkel-Kalt, Markus & Kasinger, Johannes & Schneider, Dmitrij, 2022. "Skewness preferences: Evidence from online poker," SAFE Working Paper Series 351, Leibniz Institute for Financial Research SAFE.

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