A Reexamination of the Efficiency of the Betting Market on National Hockey League Games

Gandar, John M.; Zuber, Richard A.; Johnson, R. Stafford

doi:10.1177/1527002503257208

Cited by 23 publications

(17 citation statements)

References 5 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Given the importance of the home/road distinction found in studies of sports which use odds betting (specifically baseball and hockey) in Gandar et al (2002) and Gandar et al (2004), we decided to initially split the data into home favorites (road underdogs) and road favorites (home underdogs) to examine the actions of bettors and observe results of various betting strategies. If sportsbooks were basing odds off of the flow of dollars bet and setting prices to balance the betting dollars, under the assumptions of the traditional models of sportsbook behavior, the odds should reflect the percentage of bets received on the favorite and the underdog.…”

Section: Sports Insights Betting Data-nhl 2005-06-2007-08 Seasonsmentioning

confidence: 99%

“…Both sports were found to have a significant reverse favorite-longshot bias. Woodland and Woodland did not equate a unit bet on the favorite and the underdog in the proper manner, so their tests were corrected by Gandar et al (2002) and by Gandar et al (2004). After the corrections were implemented, the baseball betting market was shown not to exhibit the bias for all underdogs, but the bias remained significant for the subgroups of slight underdogs and home underdogs.…”

mentioning

confidence: 99%

See 1 more Smart Citation

Sportsbook pricing and the behavioral biases of bettors in the NHL

Paul

Weinbach

2009

J Econ Finan

View full text Add to dashboard Cite

The betting market for the NHL is investigated using actual betting percentages on favorites and underdogs from real sportsbooks. Sportsbooks do not appear to attempt to price to balance the book as betting percentages are not proportional to set odds. As in the NFL and NBA, bettors are shown to have a strong preference for favorites and road favorites in particular. Simple strategies of betting against significant imbalances toward the favorite are shown to generate positive returns. Although not pricing to balance the book, sportsbooks do not appear to price to exploit known bettor biases in all cases. Clear bettor behavioral biases for road favorites are not priced into the odds as the prices set in these cases appear to be a forecast of game outcomes. Pricing as a forecast may ensure long-run viability for the sportsbook as it discourages entry into this market by informed traders and still allows the sportsbook to capture its commission on losing bets over time. JEL Classification G1The unearthing of actual betting data from real sportsbooks has allowed a more complete investigation of how sportsbooks truly set prices and, more importantly, has deepened our understanding of efficient markets, or lack thereof, within this market. Under the traditional models of sportsbook behavior, such as Pankoff (1968), Zuber et al. (1985), and Sauer et al. (1988), sportsbooks were assumed to set a market-clearing price by balancing the book. This price would split the betting action between both sides of the wagering proposition. Setting prices which balance the book allows sportsbooks to earn risk free returns when wagering balance is achieved, with sportsbooks earning their commission (under an 11-to-win-10 betting rule) on losing bets. Given that the observed price was assumed to be a result of the actions of bettors, sports betting markets became a natural place to test the efficient markets hypothesis. Findings in support of the efficient markets hypothesis within these wagering markets, where public sentiment is likely to run extremely high, served as a significant stamp of approval of this theory and supported the notion of the general "Wisdom of Crowds".Levitt (2004) challenged the traditional models of sportsbook behavior. His hypothesis assumes sportsbooks set prices to maximize profits, rather than setting prices to balance the book. Through the use of data from a betting tournament for the NFL, Levitt showed that bettors tend to prefer certain wagers, such as road favorites, and sportsbooks incorporate these known bettor biases into prices. With biased prices, sportsbooks earn higher profits by becoming an active participant in the wager, effectively wagering on the less-popular side of the proposition. Under the Levitt hypothesis, sportsbooks are not only good at forecasting game outcomes, but also know the likely biases of bettors, and are able to exploit these advantages through their pricing.One problem with the study of Levitt (2004) was the use of a betting tournament rather than data from an actual sport...

show abstract

Section: Sports Insights Betting Data-nhl 2005-06-2007-08 Seasonsmentioning

confidence: 99%

mentioning

confidence: 99%

Sportsbook pricing and the behavioral biases of bettors in the NHL

Paul

Weinbach

2009

J Econ Finan

View full text Add to dashboard Cite

show abstract

“…1.05) is [1 -(1 / β 1 )(1 / β 2 )] / [(1 / β 1 ) + (1 / β 2 ) + 2]. For details, see Gandar, Zuber, Johnson, and Dare (2002) and Gandar, Zuber, and Johnson (2004).…”

mentioning

confidence: 94%

“…Although a researcher could conduct such a test by comparing a strategy's winning proportions using the variable break-even propor- tions shown in Table 1, the usual efficiency test compares, at each money line, a betting strategy's actual returns against the return expected in an efficient market (the negative of the commission at that money line) or against zero (a test of profitability). These tests are developed in Woodland (1994, 2001); Gandar, Zuber, Johnson, and Dare (2002); and Gandar, Zuber, and Johnson (2004). Because the actual money lines for the more than two thirds of bets with odds adjustments are not known, tests of the efficiency or profitability of Brown and Abraham's (2002) strategies of betting on or against streaks cannot be carried out.…”

mentioning

confidence: 99%

An Evaluation of the Debate Over “Testing Market Efficiency in the Major League Baseball Over-Under Betting Market”

Gandar

Zuber

2004

Journal of Sports Economics

Self Cite

View full text Add to dashboard Cite

InarecentarticlepublishedintheJournalofSportsEconomics, BrownandAbraham (2002) present the first examination of the efficiency of the totals betting market on Major League Baseball (MLB) games. The article finds that a profitable betting strategy-betting that a team's winning streak against the posted totals line will continue-existed in the 1997 MLB season but was not profitable in other MLB seasons studied. Brown and Abraham (2002) explain the 1997 result on the uncertainties introduced into team performance in this season by team expansion, realignment, and the introduction of interleague play. This article has elicited the comment by Paul and Weinbach (2004) and the reply by Brown and Abraham (2004).Paul and Weinbach make two major points. First, the data set used by Brown and Abraham (2002) is missing the vital ingredient of the money line (odds) that is attached to the betting proposition. Paul and Weinbach's point is that, because these odds determine payouts, they are pivotal to any study of efficiency in this market. Second, in addition to assuming that all bets are no odds (or so-called flat odds) bets, Brown and Abraham (2002) assume a 40-cent instead of a 20-cent line. As a result, their study uses a constant break-even proportion of 0.545 to test for profitability. Paul and Weinbach's point is that such a test must take into account the variations in commissions and in break-even proportions stemming from the variations in odds.Brown and Abraham's (2004) reply addresses these criticisms. These authors first argue that using a 20-cent money line instead of a 40-cent money line strengthens, rather than weakens, their finding of inefficiency in this market. Their argu-

show abstract

“…In order to conduct EMH tests in money line betting markets, these money lines need to be converted into win probabilities that can be compared to observed win frequencies. However, there appear to be at least three methods of converting money lines into win probabilities in this literature: the method outlined in Woodland and Woodland (1994, 2001); the modification of the Woodland and Woodland method by Gandar, Zuber, and Johnson (2002) and Gandar, Zuber, Johnson, and Dare (2004); and the method used by Sauer (2005). The question of which method is appropriate has yet to be addressed.…”

Section: Introductionmentioning

confidence: 99%

The Conversion of Money Lines Into Win Probabilities

Berkowitz

Depken

Gandar

2017

Journal of Sports Economics

Self Cite

View full text Add to dashboard Cite

We contribute to the literature on money line betting markets by investigating the relationships between the various methods used to derive subjective win probabilities from money lines. We show that, although the seven methods described appear to be unique, they actually share many common assumptions and that, surprisingly, they reduce to three distinct estimates of bookmaker commission and subjective win probabilities. We also show that among the three distinct estimates, one is biased when money lines suggest a very heavy favorite in a particular sporting event. Thus, it is important to consider the assumptions for each method when deciding which to use in a particular context. Two empirical examples demonstrate how a market inefficiency, such as a favorite-longshot bias, should influence the choice of methodology.

show abstract

A Reexamination of the Efficiency of the Betting Market on National Hockey League Games

Cited by 23 publications

References 5 publications

Sportsbook pricing and the behavioral biases of bettors in the NHL

Sportsbook pricing and the behavioral biases of bettors in the NHL

An Evaluation of the Debate Over “Testing Market Efficiency in the Major League Baseball Over-Under Betting Market”

The Conversion of Money Lines Into Win Probabilities

Contact Info

Product

Resources

About