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Betting Market Efficiency in the Presence of Unfamiliar Shocks: The Case of Ghost Games during the Covid-19 Pandemic

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  • Kai Fischer
  • Justus Haucap

Abstract

Betting markets have been frequently used as a natural laboratory to test the efficient market hypothesis and to obtain insights especially for financial markets. We add to this literature in analyzing the velocity and accuracy in which market expectations adapt to an exogenous shock: the introduction of soccer ghost games during the Covid-19 pandemic. We find that betting odds do not properly reflect the effect of ghost games regarding changes in home advantage. Furthermore, we present evidence for a slow to non-existing adaption process with respect to new match results, indicating a lack of semi-strong efficiency. Based on these findings, we also identify very simple but highly profitable betting strategies which underline our rejection of the efficient market hypothesis.

Suggested Citation

  • Kai Fischer & Justus Haucap, 2020. "Betting Market Efficiency in the Presence of Unfamiliar Shocks: The Case of Ghost Games during the Covid-19 Pandemic," CESifo Working Paper Series 8526, CESifo.
    • Handle: RePEc:ces:ceswps:_8526
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    Cited by:

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    2. Arif Yüce & Sevda Gökce Yüce & Hakan Katırcı & Volkan Aydoğdu & Weisheng Chiu & Mark D. Griffiths, 2023. "The Effect of the COVID-19 Pandemic on Sports Betting Tipsters as Professional Bettors: A Qualitative Interview Study," Sustainability, MDPI, vol. 15(9), pages 1-19, May.
    3. Alex Bryson & Peter Dolton & J. James Reade & Dominik Schreyer & Carl Singleton, 2021. "What we can learn about economics from professional sport during Covid-19," National Institute of Economic and Social Research (NIESR) Discussion Papers 525, National Institute of Economic and Social Research.
    4. Luca De Angelis & J. James Reade, 2022. "Home advantage and mispricing in indoor sports’ ghost games: the case of European basketball," Economics Discussion Papers em-dp2022-01, Department of Economics, University of Reading.
    5. Tadgh Hegarty, 2021. "Information and price efficiency in the absence of home crowd advantage," Applied Economics Letters, Taylor & Francis Journals, vol. 28(21), pages 1902-1907, December.
    6. Luke S. Benz & Michael J. Lopez, 2023. "Estimating the change in soccer’s home advantage during the Covid-19 pandemic using bivariate Poisson regression," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 107(1), pages 205-232, March.
    7. Luca De Angelis & J. James Reade, 2023. "Home advantage and mispricing in indoor sports’ ghost games: the case of European basketball," Annals of Operations Research, Springer, vol. 325(1), pages 391-418, June.
    8. Carl Singleton & Alex Bryson & Peter Dolton & James Reade & Dominik Schreyer, 2022. "Economics lessons from sports during the COVID-19 pandemic," Chapters, in: Paul M. Pedersen (ed.), Research Handbook on Sport and COVID-19, chapter 2, pages 9-18, Edward Elgar Publishing.

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    More about this item

    Keywords

    home advantage; betting market; efficient market hypothesis; ghost games;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Z20 - Other Special Topics - - Sports Economics - - - General
    • Z21 - Other Special Topics - - Sports Economics - - - Industry Studies
    • Z23 - Other Special Topics - - Sports Economics - - - Finance

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