Sentiment Bias and Asset Prices: Evidence From Sports Betting Markets and Social Media

Abstract

Previous research using attendance‐based proxies for sentiment bias in sports betting markets confirmed the presence of investor sentiment in these markets. We use data from social media (Facebook “Likes”) to proxy for sentiment bias and analyze variation in bookmakers' prices investor sentiment. Based on betting data from seven professional sports leagues in Europe and North America, we find evidence that bookmakers increase prices for bets on teams with relatively more Facebook “Likes,” indicating the presence of price‐insensitive investors with sentiment bias. These price changes do not affect informational efficiency in this market. (JEL L81, G14)

Predictive Models for Game Outcomes in Women's Lacrosse

“…One area of game outcome prediction centers around sports betting. While many papers attempt to address this problem, all of them only look at pre-game data [6][7][8]. This is because you can only bet on a sport before it begins.…”

Does Sentiment Harm Market Efficiency? An Empirical Analysis Using a Betting Exchange Setting

“…In the literature, sentiment is often associated with the nonprofit-maximizing behavior of bettors or investors (e.g., Avery & Chevalier, 1999) and deviations from standard rational choice models (Feddersen et al, 2017). Forrest and Simmons (2008) exemplify two views regarding the existence of sentimental bettors.…”

“…This is consistent with Kuypers (2000), who shows that bookmakers might set inefficient odds if the bookmaker is profit maximizing and bettors have biased expectations, and with Humphreys (2010), who shows that bookmakers operate with an unbalanced book to exploit the large share of bettors who bet on the stronger team in the NBA. Feddersen et al (2017) analyze five European soccer leagues, the NBA and the NFL and use Facebook "likes" to proxy bettor sentiment, as more popular teams draw more attention from sentimental bettors. Feddersen et al (2017) show evidence that bettor sentiment influences the pricing decisions of bookmakers, such that bookmakers offer less favorable odds for sentiment-prone wagers.…”

“…Feddersen et al (2017) analyze five European soccer leagues, the NBA and the NFL and use Facebook "likes" to proxy bettor sentiment, as more popular teams draw more attention from sentimental bettors. Feddersen et al (2017) show evidence that bettor sentiment influences the pricing decisions of bookmakers, such that bookmakers offer less favorable odds for sentiment-prone wagers.…”

“…The empirical evidence regarding whether sentiment influences the pricing decisions of bookmakers is mixed. Avery and Chevalier (1999), Strumpf (2003), Levitt (2004) and Feddersen, Humphreys and Soebbing (2017) show that bookmakers increase the prices (lower the odds) for more sentiment-prone teams, while Forrest and Simmons (2008), Franck et al (2011) and Feddersen, Humphreys and Soebbing (2016) find that bookmakers decreased the prices (increase the odds). Braun and Kvasnicka (2013) find that some bookmakers increase the prices while others decrease the prices in the presence of sentiment.…”