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Are sports betting markets semistrong efficient? Evidence from the COVID-19 pandemic

Author

Listed:
  • Pascal Flurin Meier

    (Department of Business Administration, University of Zurich)

  • Raphael Flepp

    (Department of Business Administration, University of Zurich)

  • Egon Franck

    (Department of Business Administration, University of Zurich)

Abstract

This paper examines whether sports betting markets are semistrong-form efficient — i.e., whether new information is rapidly and completely incorporated into betting prices. We use news on ghost games in the top European football leagues due to the COVID-19 pandemic as a clean arrival of new public information. Because spectators are absent during ghost games, the home advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers and betting exchanges systematically overestimated a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semistrong-form efficient. Examining different leagues, we find that our main results are driven by the German Bundesliga, which was the first league to resume operations. We exploit a betting strategy that yields a positive net payoff over more than one month.

Suggested Citation

  • Pascal Flurin Meier & Raphael Flepp & Egon Franck, 2021. "Are sports betting markets semistrong efficient? Evidence from the COVID-19 pandemic," Working Papers 387, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:zrh:wpaper:387
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    More about this item

    Keywords

    Sports Betting Market; Market Efficiency; Home Advantage; COVID-19;
    All these 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
    • Z2 - Other Special Topics - - Sports Economics

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