Are Sports Bettors Biased toward Longshots, Favorites, or Both? A Literature Review

Abstract

A large body of literature on the favorite–longshot bias finds that sports bettors in a variety of markets appear to have irrational biases toward either longshots (which offer a small chance of winning a large amount of money) or favorites (which offer a high chance of winning a small amount of money). While early studies in horse racing led to an impression that longshot bias is dominant, favorite bias has also now been found in a variety of sports betting markets. This review proposes that the evidence is consistent with both biases being present in the average sports bettor. Sports betting markets with only two potential outcomes, where the favorite therefore has a probability >0.5 of happening, often produce favorite bias. Sports betting markets with multiple outcomes, where the favorite’s probability is usually <0.5, appear more consistent with longshot bias. The presence of restricted odds ranges within any given betting market provides an explanation for why single studies support, at most, one bias. This literature review highlights how individual sports bettors might possess biases toward both highly likely, and highly unlikely, events, a contradictory view that has not been summarized in detail before.

Informational efficiency and behaviour within in-play prediction markets

“…We also discuss how this framework of regression models and hypothesis testing provides a practical approach to describe and evaluate some of the possible behavioural biases present in these markets, such as the well-know favouritelongshot bias, sometimes just referred to as the longshot bias (e.g. Ottaviani and Sørensen, 2008;Snowberg and Wolfers, 2010;Newall and Cortis, 2021), the home bias (e.g. Levitt, 2004), under or overreaction to major news (e.g.…”

“… See Cain et al (2000);Deschamps and Gergaud (2007) for English football, as well asAngelini and De Angelis (2019) more generally for European professional football.5 Ours is by no means the only study to find a reverse favourite-longhsot bias. For example,Woodland and Woodland (1994) found something similar in prediction markets for US baseball, though insufficient in that case to imply significant market inefficiency Newall and Cortis (2021). suggest in a review of the literature that betting markets with fewer outcomes tend to produce a favourite bias (e.g., team sports), whereas a longshot bias appears in markets with many outcomes (e.g., horse racing or golf).…”

The Importance of Betting Early

“…A large body of empirical evidence supports the view that bettors' behavior does not conform to the rational decision model and is affected by some cognitive biases (Diecidue et al 2004;Osborne 2001). First, bettors show a clear tendency to under-bet favorites and over-bet long shots (Golec and Tamarkin 1995;Paul and Weinbach 2005;Newall and Cortis 2021). Second, they exhibit decision biases such as confirmation, gambler's fallacy, and overconfidence related to inaccurate information processing (Blavatskyy 2009;Palomino et al 2009).…”

Weak Form Efficiency in Sports Betting Markets

“…They review the two explanations discussed above, as well as several others. A more recent review of the literature on the longshot bias is presented in Newall and Cortis (2021).…”