Prediction accuracy of different market structures -- bookmakers versus a betting exchange
There is a well-established body of literature on separately testing the prediction power of different betting market settings. This paper provides an inter-market comparison of the forecasting accuracy of bookmakers and a major betting exchange. Employing a dataset covering all football matches played in the major leagues of the "Big Five" (England, France, Germany, Italy, Spain) during three seasons (5478 games in total), we find evidence that the betting exchange provides more accurate predictions of a given event than bookmakers. A simple betting strategy of selecting bets for which bookmakers offer lower probabilities (higher odds) than the betting exchange generates above average, and in some cases even positive returns.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Forsythe, Robert & Forrest Nelson & George R. Neumann & Jack Wright, 1992. "Anatomy of an Experimental Political Stock Market," American Economic Review, American Economic Association, vol. 82(5), pages 1142-61, December.
- Karen Croxson & J. James Reade, 2014.
"Information and Efficiency: Goal Arrival in Soccer Betting,"
Royal Economic Society, vol. 124(575), pages 62-91, 03.
- Karen Croxson & J. James Reade, 2011. "Information and Efficiency: Goal Arrival in Soccer Betting," Discussion Papers 11-01, Department of Economics, University of Birmingham.
- Egon Franck & Erwin Verbeek & Stephan Nüesch, 2011.
"Sentimental Preferences and the Organizational Regime of Betting Markets,"
Southern Economic Journal,
Southern Economic Association, vol. 78(2), pages 502-518, October.
- Â Egon Franck & Â Erwin Verbeek & Â Stephan Nuesch, . "Â Sentimental Preferences and the Organizational Regime of Betting Markets," Working Papers 0089, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2010.
- Dixon, Mark J. & Pope, Peter F., 2004. "The value of statistical forecasts in the UK association football betting market," International Journal of Forecasting, Elsevier, vol. 20(4), pages 697-711.
- Ioannis Asimakopoulos & John Goddard, 2004. "Forecasting football results and the efficiency of fixed-odds betting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(1), pages 51-66.
- Martin Spann & Bernd Skiera, 2003. "Internet-Based Virtual Stock Markets for Business Forecasting," Management Science, INFORMS, vol. 49(10), pages 1310-1326, October.
- repec:reg:rpubli:259 is not listed on IDEAS
- Berg, Joyce E. & Nelson, Forrest D. & Rietz, Thomas A., 2008. "Prediction market accuracy in the long run," International Journal of Forecasting, Elsevier, vol. 24(2), pages 285-300.
- Wolfers, Justin & Zitzewitz, Eric, 2004.
1854, Stanford University, Graduate School of Business.
- Boulier, Bryan L. & Stekler, H. O., 2003. "Predicting the outcomes of National Football League games," International Journal of Forecasting, Elsevier, vol. 19(2), pages 257-270.
- Vaughan Williams, Leighton, 1999. "Information Efficiency in Betting Markets: A Survey," Bulletin of Economic Research, Wiley Blackwell, vol. 51(1), pages 1-30, January.
- Cain, Michael & Law, David & Peel, David, 2000. "The Favourite-Longshot Bias and Market Efficiency in UK Football Betting," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(1), pages 25-36, February.
- Steven D. Levitt, 2004. "Why are gambling markets organised so differently from financial markets?," Economic Journal, Royal Economic Society, vol. 114(495), pages 223-246, 04.
- Forrest, David & Goddard, John & Simmons, Robert, 2005. "Odds-setters as forecasters: The case of English football," International Journal of Forecasting, Elsevier, vol. 21(3), pages 551-564.
- David Forrest & Robert Simmons, 2008. "Sentiment in the betting market on Spanish football," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 119-126.
- Martin Spann & Bernd Skiera, 2009. "Sports forecasting: a comparison of the forecast accuracy of prediction markets, betting odds and tipsters," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(1), pages 55-72.
- Michael A. Smith & David Paton & Leighton Vaughan Williams, 2006. "Market Efficiency in Person-to-Person Betting," Economica, London School of Economics and Political Science, vol. 73(292), pages 673-689, November.
When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:26:y::i:3:p:448-459. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.