Inter-market Arbitrage in Sports Betting - National Centre for ...

<strong>Inter</strong>‐<strong>market</strong> <strong>Arbitrage</strong> <strong>in</strong> <strong>Sports</strong> Bett<strong>in</strong>g Egon Franck, Erw<strong>in</strong> Verbeek * , Stephan Nüesch (version: October 2009) Abstract Unlike the exist<strong>in</strong>g literature on sports bett<strong>in</strong>g, which concentrates on arbitrage with<strong>in</strong> a s<strong>in</strong>gle <strong>market</strong>, this paper exam<strong>in</strong>es <strong>in</strong>ter-<strong>market</strong> arbitrage by search<strong>in</strong>g <strong>for</strong> arbitrage opportunities through comb<strong>in</strong><strong>in</strong>g bets at the bookmaker and the exchange <strong>market</strong>. Us<strong>in</strong>g the posted odds of eight different bookmakers and the correspond<strong>in</strong>g odds traded at a well-known bet exchange <strong>for</strong> 5,478 football matches played <strong>in</strong> the top-five European leagues dur<strong>in</strong>g three seasons, we f<strong>in</strong>d (only) ten <strong>in</strong>tra-<strong>market</strong> arbitrage opportunities. However, we f<strong>in</strong>d 1,450 cases <strong>in</strong> which a comb<strong>in</strong>ed bet at the bookmaker as well as at the exchange yields a guaranteed positive return. Further analyses reveal that <strong>in</strong>ter-<strong>market</strong> arbitrage emerges from different levels of <strong>in</strong><strong>for</strong>mational efficiency between the two <strong>market</strong>s. * Correspond<strong>in</strong>g author: University of Zurich, Institute <strong>for</strong> Strategy and Bus<strong>in</strong>ess Economics, Plattenstrasse 14, 8032 Zurich, email: erw<strong>in</strong>.verbeek@isu.uzh.ch, phone: +41 44 634 29 61