IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Exploiting Inefficiencies in Financial and Sports Gambling Markets: Exploratory Drift Modeling

Listed author(s):
  • William S. Mallios

Cointegrated time series associated with financial and sports gambling markets are analyzed in terms of time-varying parameter models. Parameter drift is modeled in terms of lagged disequilibria. Model forecasts are intended to capitalize on periods of market inefficiency. Modeling premises are that (1) present and past disequilibria—shocks both within and between time series—may affect subsequent changes and rates of these changes within individual series and (2) sufficiently large shocks may disrupt/alter model structure such that resulting forecasts may be temporarily unreliable. Reduced forecasting equations are in terms of higher order ARMA models that are not limited to bilinear processes. Sports forecasting models based on public information are usually more effective—in terms of profitable trading/wagering strategies—than those for the financial sector for two reasons: (1) Insider information is less prevalent. (2) Modeling is simplified since lagged shocks associated with the gambling lines/spreads are known—in contrast with financial modeling where there are no comparable gambling shocks, only unknown, lagged statistical shocks in terms of MA variables. Forecasting is illustrated for NFL and NBA playoff games. In financial markets, cointegration is discussed in terms of candlestick chart variants with modeling illustrations given in terms of recent Google price changes.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by University of Buckingham Press in its journal Journal of Prediction Markets.

Volume (Year): 2 (2008)
Issue (Month): 3 (December)
Pages: 15-32

in new window

Handle: RePEc:buc:jpredm:v:2:y:2008:i:3:p:15-32
Contact details of provider: Web page:

Order Information: Web: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:buc:jpredm:v:2:y:2008:i:3:p:15-32. 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)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.