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Underdogs Are Man’S Best Friend: A Test Of Football Market Efficiency, Ladd Kochman, Randy Goodwin
Underdogs Are Man’S Best Friend: A Test Of Football Market Efficiency, Ladd Kochman, Randy Goodwin
Ladd Kochman
Two mechanical betting rules that had exposed biases in previous studies were applied to National Football League games for the five consecutive seasons ending with the 2003 Super Bowl. Although bets on home teams produced only break-even results, wagers on underdogs posed a serious challenge to the efficient market hypothesis. One possible explanation is that favorites are no less “public” in the minds of bettors than IBM, GE, and the like are public in the minds of investors and may therefore be the victims of inflated expectations and point spreads.
Pricing Inefficiencies In The Football-Betting Market, Ladd Kochman, Ravija Badarinathi
Pricing Inefficiencies In The Football-Betting Market, Ladd Kochman, Ravija Badarinathi
Ladd Kochman
Since Pankoff (Journal of Business, 1968), investment writers have recognized that bets on the outcome of football games provide an unusually direct test of pricing efficiency by market consensus. In a football context, prices are proxied by pointspreads (values ranging from 1 to 50+, which represent the bettors' expectations regarding the stronger team's victory margin). Efficiency refers to the impossibility of using betting rules based on past performance or information not discounted by the spread to win consistently.