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Efficient Markets? Don't Bet on It

  • Evan Osborne

    (Wright State University)

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    This article tests the efficient-markets hypothesis by looking at profits in National Football League (NFL) betting markets. The author tests whether successful betting strategies exist when points scored and allowed earlier in a season can outperform the betting line in predicting the margin of victory in NFL games and finds that profitable strategies exist. In addition, the author finds that over the course of a season, bettors do imperfectly incorporate information about team strength and that NFL victory margins are a highly variable process.

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    Article provided by in its journal Journal of Sports Economics.

    Volume (Year): 2 (2001)
    Issue (Month): 1 (February)
    Pages: 50-61

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    Handle: RePEc:sae:jospec:v:2:y:2001:i:1:p:50-61
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    1. McCullough, B. D., 1997. "An analysis of stock market transactions data," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(4), pages 887-903.
    2. Golec, Joseph & Tamarkin, Maurry, 1991. "The degree of inefficiency in the football betting market : Statistical tests," Journal of Financial Economics, Elsevier, vol. 30(2), pages 311-323, December.
    3. Woodland, Bill M & Woodland, Linda M, 1991. "The Effects of Risk Aversion on Wagering: Point Spread versus Odds," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 638-53, June.
    4. Sauer, Raymond D, et al, 1988. "Hold Your Bets: Another Look at the Efficiency of the Gambling Market for National Football League Games: Comment," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 206-13, February.
    5. John M. Gandar & William H. Dare & Craig R. Brown & Richard A. Zuber, 1998. "Informed Traders and Price Variations in the Betting Market for Professional Basketball Games," Journal of Finance, American Finance Association, vol. 53(1), pages 385-401, 02.
    6. Zuber, Richard A & Gandar, John M & Bowers, Benny D, 1985. "Beating the Spread: Testing the Efficiency of the Gambling Market for National Football League Games," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 800-806, August.
    7. Blum, U. & Dudley, L., 1990. "A Spatial Model of the State," Cahiers de recherche 9030, Universite de Montreal, Departement de sciences economiques.
    8. Losey, Robert L & Talbott, John C, Jr, 1980. " Back on the Track with the Efficient Markets Hypothesis," Journal of Finance, American Finance Association, vol. 35(4), pages 1039-43, September.
    9. Gray, Philip K & Gray, Stephen F, 1997. " Testing Market Efficiency: Evidence from the NFL Sports Betting Market," Journal of Finance, American Finance Association, vol. 52(4), pages 1725-37, September.
    10. Russo, Benjamin & Gandar, John M. & Zuber, Richard A., 1989. "Market rationality tests based on cross-equation restrictions," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 455-470, November.
    11. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
    12. Gandar, John, et al, 1988. " Testing Rationality in the Point Spread Betting Market," Journal of Finance, American Finance Association, vol. 43(4), pages 995-1008, September.
    13. W. David Walls, 1995. "An Econometric Analysis of the Market for Natural Gas Futures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 71-84.
    14. Ederington, Louis H. & Huang, Chao-Hsi, 1995. "Parameter uncertainty and the rational expectations model of the term structure," Journal of Banking & Finance, Elsevier, vol. 19(2), pages 207-223, May.
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