IDEAS home Printed from https://ideas.repec.org/p/ucn/wpaper/202304.html

Calculating The Bookmaker’s Margin: Why Bets Lose More On Average Than You Are Warned

Author

Listed:
  • Tadgh Hegarty
  • Karl Whelan

Abstract

If betting markets are efficient, then the expected loss rate on all bets on a game can be calculated from the quoted odds. Guides to sports betting tell bettors how to do this calculation of the predicted average loss rate. We show that if bookmakers set higher profit margins for bets with lower probabilities of winning (as implied by the evidence on favorite-longshot bias) then average loss rates across all bets will be higher than predicted by this widely-recommended calculation. We provide evidence from betting on soccer and tennis to illustrate that average realized loss rates on bets are consistently higher than predicted by the conventional calculation.

Suggested Citation

  • Tadgh Hegarty & Karl Whelan, 2023. "Calculating The Bookmaker’s Margin: Why Bets Lose More On Average Than You Are Warned," Working Papers 202304, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:202304
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10197/24354
    File Function: First version, 2023
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z20 - Other Special Topics - - Sports Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:202304. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: UCD School of Economics (email available below). General contact details of provider: https://edirc.repec.org/data/educdie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.