Globalisation and Efficiency in the Fixed-odds Soccer Betting ... - Istituti

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ABSTRACT The paper analyses patterns of odds in the British soccer betting market over four seasons from 1997. It uncovers limited evidence for home-away and favourite-longshot bias identified in previous research. It also considers the hitherto unexplored issue of the extent to which odds set by bookmakers reflect the different numbers of supporters that different football clubs have. However, by the end of the period, the growth, from 1999, of a significant offshore sector with tax-free betting opportunities and greater competition had moved the market strongly towards efficiency. JEL Classification: L83 1
1. Introduction A voluminous literature, comprehensively surveyed by Sauer (1998) and Vaughan Williams (1999), concerns itself with efficiency in betting markets. The core question addressed is whether and to what extent the terms of bets on horse races or sports events capture accurately the objective probabilities of the possible outcomes. Given the size of wagering turnover in many jurisdictions, the question is interesting in itself; but most authors give it further and wider significance by portraying these specialised financial markets (where bettors are purchasing state contingent claims on ‘winnings’) as offering opportunities for learning general lessons about the ability of economic agents to process information and about how successfully the information is transmitted into market prices. The largest number of studies relates to horse racing in the United States. 1 There, betting is organised on a pari mutuel (or pool) basis such that the relative odds of the competitors in a race depend only on the relative amounts wagered on each horse. Relative prices are therefore entirely demand-determined. If observed prices are inefficient in the sense of failing to reflect objective probabilities, this can be attributable only to bettor behaviour: either bettors suffer systematic misperceptions (uncorrected by arbitrageurs) or the explanation lies in their preferences (e.g. the well-known favourite-longshot bias may be generated by utility functions characterisable as risk-loving). A second way in which betting may be organised is in a bookmaker market. This is the dominant form of gambling on horse races in Britain, Ireland and many Commonwealth countries and is also favoured for wagering on team sports in the United States. In these 2
Page 1: Address for correspondence: Globali
Page 5 and 6: Section 2 outlines the main feature
Page 7 and 8: With some exceptions (e.g. televise
Page 9 and 10: League fixture. In response to the
Page 11 and 12: strategies require considerable eff
Page 13 and 14: 4. Data Our model was estimated for
Page 15 and 16: given the growing volume of betting
Page 17 and 18: In other words, what he is really e
Page 19 and 20: where PROBWINi is the probability t
Page 21 and 22: Tables 1B and 1C display disaggrega
Page 23 and 24: Home-away Bias That it is more fina
Page 25 and 26: 3,000, one would have bet 131 times
Page 27 and 28: passing the 1.2 filter ratio for se
Page 29 and 30: Bookmakers have strong incentives t
Page 31 and 32: the favourable odds offered on thei
Page 33 and 34: games (where inside information and
Page 35 and 36: REFERENCES Avery, C., and Chevalier
Page 37 and 38: Kuypers, T., (2000), “Information
Page 39 and 40: Table 1A Regression results - all m
Page 41 and 42: Table 1C Regression results - Divis
Page 43: 1 A large and convenient collection

Globalisation and Efficiency in the Fixed-odds Soccer Betting ... - Istituti

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