IDEAS home Printed from https://ideas.repec.org/a/buc/jpredm/v2y2008i2p13-28.html
   My bibliography  Save this article

The Relative Importance of Strength and Weight in Processing New Information in the College Football Betting Market

Author

Listed:
  • Greg Durham
  • Mukunthan Santhanakrishnan

Abstract

Griffin and Tversky (1992) suggest that individuals, when formulating posterior probabilities based on the available evidence, tend to overreact to a new piece of evidence's strength while underreacting to the relative importance of its weight. We test this prediction using the college football betting market, a market that is commonly employed in tests for efficiency and rationality. Using average points in excess of the spread and streak against the spread as measures for strength and weight, respectively, we find that bettors overreact to strength and underreact to weight. These results are consistent with the predictions of Griffin and Tversky, as well as with the findings of Sorescu and Subrahmanyam (2006) and Barberis, Shleifer, and Vishny (1998) in financial market settings. Our work also provides insight into how behavioral biases might affect price-formation processes in other markets.

Suggested Citation

  • Greg Durham & Mukunthan Santhanakrishnan, 2008. "The Relative Importance of Strength and Weight in Processing New Information in the College Football Betting Market," Journal of Prediction Markets, University of Buckingham Press, vol. 2(2), pages 13-28, September.
  • Handle: RePEc:buc:jpredm:v:2:y:2008:i:2:p:13-28
    as

    Download full text from publisher

    File URL: http://www.ingentaconnect.com/content/ubpl/jpm/2008/00000002/00000002/art00002
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Choi, Darwin & Hui, Sam K., 2014. "The role of surprise: Understanding overreaction and underreaction to unanticipated events using in-play soccer betting market," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 614-629.

    More about this item

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:buc:jpredm:v:2:y:2008:i:2:p:13-28. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson, College of the Holy Cross). General contact details of provider: http://www.ubpl.co.uk/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.