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Overreaction in the NFL point spread market

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  • Roger Vergin

Abstract

A tendency for individuals to overweigh recent information and underweigh prior data has been discovered by researchers in financial markets, economic forecasting, security analysis and other areas. A study of point spread patterns in the 2264 regular season National Football League (NFL) games over the 1981-;1995 seasons was conducted to investigate the overreaction bias of bettors. Results indicated that bettors tend to overweigh outstanding positive performance when measured over the previous game, over the previous two to five games or over the previous season. In general, the more outstanding the performance, the greater the overreaction. However, bettors did not overreact to unusual negative performance over the same periods. This result is congruent with the tendency for heavy favourites to cover the point spread less than half the time over the 1969-;1995 seasons. The overreaction bias in the NFL betting market provides another example of a violation of the weak form of the Efficient Markets Hypothesis.

Suggested Citation

  • Roger Vergin, 2001. "Overreaction in the NFL point spread market," Applied Financial Economics, Taylor & Francis Journals, vol. 11(5), pages 497-509.
  • Handle: RePEc:taf:apfiec:v:11:y:2001:i:5:p:497-509
    DOI: 10.1080/096031001752236780
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    Citations

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    Cited by:

    1. C. Barry Pfitzner & Steven D. Lang & Tracy D. Rishel, 2009. "The Determinants of Scoring in NFL Games and Beating the Over/Under Line," New York Economic Review, New York State Economics Association (NYSEA), vol. 40(1), pages 28-39.
    2. Stekler, H.O. & Sendor, David & Verlander, Richard, 2010. "Issues in sports forecasting," International Journal of Forecasting, Elsevier, vol. 26(3), pages 606-621, July.
      • Herman O. Stekler & David Sendor & Richard Verlander, 2009. "Issues in Sports Forecasting," Working Papers 2009-002, The George Washington University, Department of Economics, Research Program on Forecasting.
    3. Antonios Antoniou & Emilios Galariotis & Spyros Spyrou, 2006. "The effect of time-varying risk on the profitability of contrarian investment strategies in a thinly traded market: a Kalman filter approach," Applied Financial Economics, Taylor & Francis Journals, vol. 16(18), pages 1317-1329.
    4. Boubaker, Sabri & Farag, Hisham & Nguyen, Duc Khuong, 2015. "Short-term overreaction to specific events: Evidence from an emerging market," Research in International Business and Finance, Elsevier, vol. 35(C), pages 153-165.
    5. Caiado, Jorge & Vieira, Aníbal & Bonito, Ana & Reis, Carlos & Fernandes, Francisco, 2006. "Previsão da eficácia ofensiva do futebol profissional: Um caso Português," MPRA Paper 2185, University Library of Munich, Germany.
    6. Andy Fodor & Michael DiFilippo & Kevin Krieger & Justin Davis, 2013. "Inefficient pricing from holdover bias in NFL point spread markets," Applied Financial Economics, Taylor & Francis Journals, vol. 23(17), pages 1407-1418, September.
    7. Chikashi Tsuji, 2006. "Overreactions in the options markets in Japan," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(2), pages 115-121, March.
    8. Borghesi, Richard & Dare, William, 2009. "A test of the widespread-point-shaving theory," Finance Research Letters, Elsevier, vol. 6(3), pages 115-121, September.
    9. Mark Schaub, 2006. "Investor overreaction to going concern audit opinion announcements," Applied Financial Economics, Taylor & Francis Journals, vol. 16(16), pages 1163-1170.
    10. Matthew Amor & William Griffiths, 2003. "Modelling the Behaviour and Performance of Australian Football Tipsters," Department of Economics - Working Papers Series 871, The University of Melbourne.

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