This paper assesses the international effi ciency of the European football betting market by examining the forecastability of match outcomes on the basis of the information contained in different sets of online and fi xed odds quoted by six major bookmakers. The paper also investigates the profi tability of strategies based on: combined betting, simple heuristic rules, regression models and prediction encompassing. The empirical results show that combined betting across different bookmakers can lead to limited but highly profi table arbitrage opportunities. Simple trading rules and betting strategies based on forecast encompassing are found capable of also producing signifi cant positive returns. Despite the deregulation, globalization and increased competition in the betting industry over recent years, the predictabilities and profi ts reported in this paper are not fully consistent with weak-form market effi ciency.
Implied volatility indices are becoming increasingly popular as a measure of market uncertainty and as a vehicle for developing derivative instruments to hedge against unexpected changes in volatility. Although jumps are widely considered as a salient feature of volatility, their implications for pricing implied volatility options and futures are not yet fully understood. This paper provides evidence indicating that the time series behavior of the VIX equity implied volatility index is well approximated by a mean reverting logarithmic diffusion with jumps. This process is capable of capturing stylized facts of VIX dynamics such as fast mean-reversion at high levels, level effects of volatility and large upward movements during times of market stress.Based on this process, we develop closed form valuation models for volatility futures and options and show that incorrectly omitting jumps may cause considerable problems to pricing and hedging.a Lecturer (Corresponding author), Manchester Accounting
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.