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Consumption Benefits and Gambling: Evidence From the NCAA Basketball Betting Market
Abstract
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... We document patterns of gambling behaviors that are in line with non-financial considerations, suggesting that some of the gambling population do not play, or do not only play for financial reasons (see Agha & Tyler, 2017;Humphreys et al., 2013a;Franck et al., 2011). ...
... Another effect is an increase in the number of bets during holidays, especially during Christmas (see Paul & Weinbach, 2010). Similar results are provided by Paul and Weinbach (2012) for the NFL and by Humphreys et al. (2013a) for college basketball in their studies about the wagering preferences of bettors. Thalheimer and Ali (1995) analyzed substitution effects between different gambling markets. ...
... If bettors were financially motivated investors, they would not care for any of the identified fan-oriented factors like team quality, team popularity, regional affiliation, high-scoring matches, balanced matches, uncertainty of outcome, the composition of soccer pools or whether a game is broadcast. Instead, investors would look at the prices and values of bets in order to maximize their profits (see Humphreys et al., 2013a). If, however, consumption motives are integrated into the analysis of gambling behavior, the return anomalies, which look puzzling otherwise, become easily explainable. ...
The typical gambler loses money but continues to gamble nonetheless. Why? Research from orthodox and behavioral economics, psychology, sociology, and medicine has offered a wide range of possible explanations. This paper reviews these explanations. The evidence is organized according to the degree of rationality assumed and/or found in the studies. This approach allows research from highly distinctive fields to be integrated within a unified framework. Gambling patterns are so highly dispersed that no satisfying one‐fits‐all explanation is possible. The findings suggest that the whole spectrum from rationality to highly destructive irrationality can be found within the gambler population.
... To the best of our knowledge the studies by Humphreys, Paul, and Weinbach (2013) and Paul and Weinbach (2010) are rare examples that analyze determinants of the demand for sports bets. While Paul and Weinbach (2010) investigate the number of bets placed on NBA and NHL games, Humphreys, Paul, and Weinbach (2013) is the only research that parses volume of dollars bet as they focus on NCAA men's basketball matches. ...
... To the best of our knowledge the studies by Humphreys, Paul, and Weinbach (2013) and Paul and Weinbach (2010) are rare examples that analyze determinants of the demand for sports bets. While Paul and Weinbach (2010) investigate the number of bets placed on NBA and NHL games, Humphreys, Paul, and Weinbach (2013) is the only research that parses volume of dollars bet as they focus on NCAA men's basketball matches. Both studies find that determinants of demand for sports bets are comparable to the determinants that affect fan behavior, such as teams' qualities, TV coverage, timing and outcome uncertainty. ...
... Gramm et al. (2007) investigate what drives betting volumes in horse racing. They find that the day of the event is important as the quality of the participants raises betting 3 By comparison: Data used by Humphreys, Paul, and Weinbach (2013) show a mean of $20,584 per NCAA basketball match. ...
Betting markets have grown considerably lately. Despite their impact on the economic importance of professional sports, they just received academic interest recently. This article determines factors affecting the amount of money bet as well as the number of matched bets placed on the largest European soccer league, namely, the English Premier League between 2009-2010 and 2015-2016. Data from the betting exchange Betfair suggest season progress, weekday, number of substitutes, both teams market values, as well as uncertainty of outcome to determine market transactions and, hence, the economic importance.
... In comparison, NBA games attracted roughly 10,000 bets per game during the same period. In terms of dollars bet, although [1] does not directly provide this information, Humphreys et al. [2] obtained dollars bet from an online sportsbook and found that the [1] information on the number of bets are highly correlated with the dollars bet on a game (correlation coefficient of 0.85). ...
... The source of our data, [1], reports the percentage of bets on the favoriteand the underdog. As noted in the introduction, however, Humphreys et al. [2] found that the dollars bet on a game are highly correlated with the number of bets reported by [1]. Therefore, the percentage of dollars bet on the game are highly correlated with the percentage of bets reported in our data set. ...
... (% Bet on the Favorite) i = α 0 + β 1 (Pointspread) i + β 2 (Dummy for Road Favorite) i + ε i (2) The dependent variable is the percentage of dollars bet on the favorite. The independent variables include an intercept, the pointspread on the game (presented as a positive number-greater favorites have larger pointspreads), and a dummy for teams which are road favorites. ...
The betting market for the Women’s National Basketball Association (WNBA) is a thin financial market, which does not attract much interest from sports bettors. Given these characteristics, it is possible that profitable wagering strategies could exist for informed bettors of the WNBA. Using betting data on the WNBA from 2007–2012, we find that simple betting strategies do not earn statistically significant returns. WNBA bettors are like NBA bettors; however, in that they strongly prefer the best teams, particularly when they are on the road. Despite this clear bias, betting against the most popular public wagers is not found to earn statistically significant profits.
... Later research challenged this assumption and found bookmakers did not balance the book. Rather, they exploited behavioural biases of bettors to take 'riskier' positions to earn larger profit (Humphreys, Paul, and Weinbach 2013;Levitt 2004;Paul and Weinbach 2008). Substantial evidence exists supporting the presence of team popularity-driven sentiment in sports betting markets. ...
... Informed participants buy and sell financial assets solely to maximize wealth; uninformed participants maximize wealth but also make transactions motivated by other factors, like popularity-driven sentiment. In sports betting markets, casual or uninformed bettors are more likely to bet on sporting events held on weekends because of lower opportunity costs to wager (Franck, Verbeek, and Nüesch 2011) or more discretionary leisure time to watch the event either live or through some sort of medium, like television or streaming, a complementary activity to betting on games (Humphreys, Paul, and Weinbach 2013). Bookmakers must be able to recognize the presence of bettors with one or more forms of biases before setting point spreads or betting odds that exploit decisions made by these bettors. ...
Sentiment bias, defined as investment decisions made for reasons unrelated to fundamentals and related to popularity, represents a common research topic in finance and economics. Empirical research on sentiment bias frequently uses data from sports betting markets. While research generally finds evidence of sentiment bias, in particular, due to team popularity, the prevalence of this bias among fans and bettors in many sports remains unclear and identification of markets with relatively larger numbers of bettors with sentiment bias poses empirical challenges. We analyse outcomes in betting markets for games played in two North American team sports leagues, the National Basketball Association (NBA) and National Football League (NFL) from the 2012–13 to 2016–17 seasons and investigate how game timing, in terms of games played on weekdays and weekends, may affect the presence of bettors with popularity-based sentiment bias. Probit model estimates explaining the probability that a bet on a team wins indicate patterns consistent with the presence of bettors with sentiment bias in the markets for betting on games in the NFL but not in the NBA, and the presence of more such bettors for NFL games played on weekends.
... Existing research has shown that betting on traditional sports is influenced by both experiential and economic motives (Humphreys et al., 2013). Many of the same motives that influence fan spectatorship also influence sports bettors, such as closely matched games between high-quality opponents (Humphreys et al., 2013). ...
... Existing research has shown that betting on traditional sports is influenced by both experiential and economic motives (Humphreys et al., 2013). Many of the same motives that influence fan spectatorship also influence sports bettors, such as closely matched games between high-quality opponents (Humphreys et al., 2013). Recent market research has also found that the ability to bet on sports drives TV spectatorship, with sports bettors most interested in placing wagers on championship games and teams they follow (Bridge, 2019). ...
The parallel media related to sports, gaming and gambling are expanding, exemplified by the emergence of esports and game-related gambling (e.g. loot boxes, esports betting). The increasing convergence of these phenomena means it is essential to understand how they interact. Given the expanding consumer base of esports, it is important to know how individuals’ backgrounds and consumption of game media may lead to esports betting. This study employs survey data (N = 1368) to investigate how demographics, alongside consumption of video games, esports and gambling can predict esports betting activity. Results reveal that both spectating esports and participation in general forms of gambling are associated with increased esports betting, no direct association was observed between the consumption of video games and esports betting. Findings suggest that while games may act as a vehicle for gambling content, highlighting the convergence of gaming and gambling, there is no intrinsic aspect which directly encourages gambling behaviours.
... While this gamified setting poses no risk of losing actual money, previous research has shown that when people predict football game results, fans who were rewarded with prizes provided more accurate predictions that fans who did not receive points (Servan-Schreiber, Wolfers, Pennock, & Galebach, 2004). Moreover, consumption motives of gambling are less susceptive to the influence of the format or level of reward (Conlisk, 1993;Humphreys, Paul, & Weinbach, 2013;. As a result, fans' game result predictions in the gamified setting are similar to real sports bettors' contexts in which fans seek external rewards. ...
... Our study sheds light on how team involvement influences fans' betting behaviour, extending previous research on team involvement which focuses on the consumption of the game or team (Funk & James, 2001). In line with the contention of Humphreys et al. (2013), fans' motivation for betting may not solely be driven by wealth maximization goals. Wagering on the favourite team could be part of the ecosystem of fan behaviour as it provides an additional layer of excitement and enjoyment when the bettor watches the games or tracks news related to their favourite team . ...
Research question: While the influence of sport context knowledge, such as home advantage and team ranking, on prediction accuracy has been discussed in the previous literature, the role of identity-based biases, such as fans’ level of team involvement and the selection of their favourite team, in betting behaviour remain unclear. The main purpose of this study is to develop an understanding of how sport fans’ biases and sport context knowledge influence the accuracy of sport game predictions.
Research methods: A smartphone application enabled us to collect real soccer game predictions and results. A total of 529 football fans participated in 53,943 predictions of 2353 professional football games within a mobile smartphone application. Chi-square tests and logistic regressions were used to analyse the data.
Results and findings: Chi-square test results indicate that individuals overestimate their favourite team to win, as well as they split their predictions into dichotomous outcomes by overestimating wins and losses and underestimating draws. Logistic regression analyses indicate that identity-based biases negatively influence prediction accuracy, whereas individuals’ sport context knowledge positively contributes to prediction accuracy.
Implications: The study contributes to our understanding of the Psychological Continuum Model, individual biases, social identity theory and the psychological concept of splitting. Findings have implications for organizations who need to understand fans’ sport gambling behaviour and sport fans who seek to optimize their game prediction accuracy to improve their bets and fantasy team selections.
... Betting markets also serve as a prime place for studying behavioral biases as sports bettors are often emotional and attached to their favorite teams and players. Past studies showed behavioral biases of sports bettors in different ways, such as their preference for the best teams (i.e., Levitt 2004;Humphreys et al. 2013), but this study takes the study of behavioral bias in a different direction, to that of race. ...
... With findings of racial bias by sports fans, team owners, general managers, and referees, it is possible that bias also exists for participants in sports betting markets. Given findings that consumption plays a major role in sports gambling and sports-bettor decisions (i.e., Paul and Weinbach 2013;Humphreys et al. 2013), sports bettors are likely to also be fans and could exhibit the same sort of prejudices seen in the previous literature. ...
This study tests for racial discrimination against minority managers in Major League Baseball using financial-market imbalances as it relates to the wagering marketplace for the sport. Using detailed betting data on the percentage bet on the favorite from Sports Insights, we test for prejudice against minority mangers using an ordinary least squares multiple regression model. The results reveal that bettors have a clear preference for the favored team as the percentage bet on the favorite increases with the odds on the favorite. In addition, they prefer road favorites by an even greater margin. In terms of minority managers, there is no evidence of discrimination against minorities. In fact, bettors prefer to wager on minority managers by a statistically significant margin when they are favorites. This finding suggests that either the participants in this financial marketplace are not prejudiced against minority managers or the financial incentives inherent in the market drive out discrimination against the minority managers.
... However, the scale of the bet does not impact the nominal return to the betting strategy discussed here or the optimality of the strategy.6 Previous papers, such asWeinbach (2011) andHumphreys, Paul andWeinbach (2013), have also used data from Sports Insights. In 2017, Sports Insights gathered betting lines from five highly recognized sportsbooks: Pinnacle, BetUS, 5Dimes, GTBets, and BetOnline. ...
... However, the scale of the bet does not impact the nominal return to the betting strategy discussed here or the optimality of the strategy.6 Previous papers, such asWeinbach (2011) andHumphreys, Paul andWeinbach (2013), have also used data from Sports Insights. In 2017, Sports Insights gathered betting lines from five highly recognized sportsbooks: Pinnacle, BetUS, 5Dimes, GTBets, and BetOnline. ...
... consumption benefits (Humphreys, Paul, & Weinbach, 2013) Loroz, 2004;Stewart & Zack, 2008). Lastly, monetary motives involve winning money (Park, Yang, Lee, Jang, & Stokowski, 2002). 1 None of these studies assess the team a gambler is betting for or against in reference to their fandom. ...
... My team was struggling and the Orioles were the underdogs and red hot at the time." BAFTing was also reported during playoff or championship games, which is consistent with findings of higher volumes of sports gambling at the end of the season (Humphreys et al., 2013). ...
Using a mixed-method exploratory approach we describe and explain the seemingly non-normative behaviors of highly identified fans who Bet Against their Favorite Teams (BAFT). Axial coding of qualitative data from 190 survey respondents and two focus groups indicates the emergence of common themes allowing a typology to unfold that explains the motives for and against BAFTing. Results reveal that Gamblers BAFT for reasons un-related to fandom. Hedgers, on the other hand, BAFT precisely because they are fans; they offset a perceived impending emotional loss with a financial gain, a behavior we identify as Hedging Against Future Failure (HAFFing). This research expands the theoretical knowledge of indirect tactics of image management and introduces HAFFing as a transactional, proactive, and private coping mechanism utilized by highly identified fans to regulate their psychological health. Beyond the implications for researchers of self-image management, these results are applicable to global sport managers adapting to the rising prominence and societal acceptance of sport gambling.
... Furthermore, we included month fixed effects, as games towards the end of the season are generally more important than games at the beginning (teams competing for the championship or Champions League tickets, or fighting relegation). For NCAA basketball, Humphreys et al. (2013) show that betting action increases as the season progresses. Furthermore, game outcome uncertainty could be higher in the months following a transfer window. ...
Digitalization has an impact on many vested businesses, decreasing marginal costs and increasing informed customers, among other things. However, measuring the impact of digitalization remains difficult. Betting markets provide a clean setting to estimate the price impact of digitalization, as products are homogeneous and it is easy to measure pricing behaviour. Consistent with mixed strategy models under imperfect information, we show that between 2000 and 2023, transaction costs for gamblers dropped by over 60%, although transaction‐cost dispersion persists. Furthermore, we also find that betting markets became more informationally efficient over this period, with a significant decrease in the favourite–longshot bias.
... This perspective sees gambling, at least in part, as an activity pursued for enjoyment rather than solely on the assessment of monetary risk and reward. Empirical studies support the view that gambling is a form of consumer activity (e.g., Humphreys et al., 2013). ...
We examine how measured intelligence, referred to as IQ, predicts a consumer's decisions on whether to participate in online horse wagering, how much to spend on those bets, and which horserace betting products to consume. We combine three individual‐level archival data sets from Finland, including all online horse bets during a 1‐year period from the state‐sanctioned monopoly operator, the Finnish Defence Forces' IQ test scores from male conscripts born between 1962 and 1990 (N = 705,809), and administrative registry data on socioeconomic status, income, and education for these men. An analysis of male bettors (N = 15,488) shows that IQ is a positive predictor of participation and spending. In addition, high IQ is associated with choosing more complex (high variance) betting products. We find that these results are driven primarily by numerical IQ.
... potential biases are also interesting from the psychological perspective, and several studies have indeed already focused on betting behaviour, e.g. investigating the 'gambler's fallacy' (Tversky and Kahneman, 1974;Clotfelter and Cook, 1993), the reaction to a perceived 'hot hand' (Sundali and Croson, 2006;Paul et al., 2014), but also the drivers of demand for sports bets more generally (Humphreys et al., 2013;Deutscher et al., 2019). ...
It is still largely unclear to what extent bettors update their prior assumptions about the strength or form of competing teams considering the dynamics during the match. This is of interest not only from the psychological perspective, but also as the pricing of live odds ideally should be driven both by the (objective) outcome probabilities and also the bettors' behaviour. Analysing large and high-resolution data from live betting in German football, we find that stakes in the live-betting market are driven both by perceived pre-game strength and by in-game strength as implied by measurable events such as shots and passes. Both effects vary over the course of the match.
... This is similar to sentiment traders in financial markets, whose investment decisions are beyond rational pricing (see e.g., Baker and Wurgler, 2007, Brown and Cliff, 2005Braun and Kvasnicka, 2013. The kick-off time of the match, especially the day of the week on which the match is played, is included since previous studies investigating pre-game betting suggest that stakes vary across days of the week (see Humphreys et al., 2013 andDeutscher et al., 2019). In our analysis, we thus consider dummy variables for the different kick-off times. ...
Sports betting markets have grown very rapidly recently, with the total European gambling market worth 98.6 billion euro in 2019. Considering a high-resolution (1 Hz) data set provided by a large European bookmaker, we investigate the effect of news on the dynamics of live betting. In particular, we consider stakes placed in a live betting market during football matches. Accounting for the general market activity level within a state-space modelling framework, we focus on the market's response to events such as goals (i.e. major news), but also to the general situation within a match such as the uncertainty about the outcome. Our results indicate that markets tend to overreact to recent news, confirming cognitive biases known from psychology and behavioural economics.
... First, the extrinsic benefit of 'earning something of value' proved to be an indispensable motive among the majority of participants. This motivation was also salient in previous studies in the realm of sports betting [68][69][70][71][72] and semi-professional poker [12]. In our study, participants explained that they find it important to keep the nature of their gambling "hobby" non-obligatory and avoid an exaggerated expenditure. ...
Whereas past CHI-related work has paid attention to various elements of the esports industry, there exists a scarcity of such research on the increasing convergence between esports and gambling. This study, therefore, aimed to shed light on the emerging phenomeno n of esports betting in two ways. First, we theorized about its characteristics according to the 5W1H framework. Second, using semi-structured laddering interviews and Means-End Chain Theory, we assessed the esports betting motivations of young, male and recreational gamblers who interact with monetary and skin betting websites. Our results show that gamblers follow various motivational pathways when using an esports betting platform and construct their motives in relation to platform-specific properties and personal values. As such, we demonstrate that a holistic understanding of esports betting is of utmost importance if we want to explain and investigate its appeal to a worldwide audience.
... Sports betting has exploded over the last few years (Humphreys, Paul, & Weinbach, 2013), with the total market value of this complex enterprise peaking at over $85 billion in 2019 and projected to exceed $100 billion by 2022. However, the most challenging aspect about betting is the perennial question: how do bettors win against the house? ...
... There is no doubt that the NCAA can attribute a significant portion of its 23-year, $19.6 billion television contract for March Madness on the popularity of "bracket pools," and likewise the NFL understands the degree to which the explosion of fantasy football leagues has increased the popularity of its games. Humphreys et al. (2013) developed evidence of a significant correlation between betting and television viewership for regular season men's NCAA basketball games. ...
... The consumption benefit may be found in the prospect of 'buying a dream.' This includes aspects such as imagining how one might spend the lotto jackpot and how one might enjoy the pleasure of the act of quitting one's job. 3 Following the logic of Forrest el al. (2002), Humphreys et al. (2013) state that the enticement to wager on sports is more rooted in consumption benefits than the perceived financial gains. Particularly, gambling is a complementary good for sports with supporters betting on outcomes they wish to see, rather than using their bet to hedge against undesirable match outcomes. ...
The crowning of Leicester City FC as English Premier League champions in 2016 is arguably the biggest upset in the history of professional sports. The pre-season odds posted for LCFC to win the EPL were 5,000:1, worse than finding Elvis alive. In our model, they win just once per 70,000 simulations; thus, bettors could expect a return of just 0.071 of the stake when betting on Leicester City. This is similar to the expected return of betting on all of the long-shots in our simulations; however, the expected value of bets on favorites averages 0.864. We find that the betting market is segmented for favorites and long-shots; while the market for favorites resembles a normal betting market, the market for long-shots is like a lottery.
... 1. Sports betting as a consumption activity has been explored in the literature in relation to bettors of college basketball (Humphreys et al., 2013) and in the inter-relationship between baseball and football bettors . ...
Purpose
The purpose of this paper is to use financial market prices formed in betting markets as a measure of uncertainty of outcome and other factors as it relates to hockey attendance in three top European leagues, the KHL, SHL, and Liiga. This is the first study of European hockey to use betting market odds to estimate the impact of home team win probability and uncertainty of outcome on attendance.
Design/methodology/approach
The design of this study is a multivariate regression model with log of attendance and percentage of arena capacity as dependent variables in two separate regressions. Controlling for other factors, the role of the home team win probability and its square are explored for individual game attendance.
Findings
Fans of the KHL and SHL are found to prefer to see their home team win, but also exhibit strong preferences for uncertainty of outcome. Fans of Liiga prefer to see the home team win, but do not exhibit as strong a preference for uncertainty of outcome. This differs from recent findings in the sport of baseball and from previous findings for the NHL.
Practical implications
Having a competitive league is not only important for television ratings, but also for in-person attendance in these European hockey leagues. Importance of uncertainty of outcome varies across leagues.
Originality/value
The paper uses financial market prices, betting market odds, as a measure of game expectations (home team win probability) and uncertainty of outcome and applies it to a new setting for three of the top European hockey leagues. The findings illustrate that uncertainty of outcome is important for the KHL and SHL, but statistically insignificant for Liiga.
... Point spreads are set by book makers based on their expectations of game outcomes and the preferences of sports bettors. Sports bettors also form expectations of game outcomes when deciding which games to bet on, although other factors may affect their betting patterns, including behavioral biases (Levitt, 2004) and consumption benefits generated by betting on specific teams (Humphreys, et al. (2013); Paul and Weinbach 2008a, 2008b, 2009. ...
Previous research on coaching turnover indicates that a number of factors, including age, firm performance, and deviation from expected performance affect turnover. We examine the relationship between performance expectations and head coach turnover using data from NCAA Division I-A college football using a market-determined measure of expected performance, winning percentage against point spreads set in betting markets; this expected performance measure does not suffer from many of the problems that plague analysts’ earnings forecasts. We find that performance expectations, actual performance, and tenure affect coaching tenure in NCAA Division I-A college football, based on performance data from 102 Division I-A football programs over the period 1980–2004.
... We assume that the percentage of bets placed on either side is highly correlated with the percentage of dollars bet and treat them as equivalent. Humphreys, Paul, and Weinbach (2010) discuss the relationship between bets placed and dollars bet. ...
Betting strategies based on the presence of home-underdog bias in the NFL have been shown to produce returns in excess of those predicted by market efficiency in some situations. Dare and Dennis (2011) attribute this bias to bettors underestimating the scoring ability of home underdogs. Using a more recent sample of data, we find contradictory results. We challenge the assumptions of the Dare and Dennis (2011) model and use detailed betting data to offer an alternative rationale for the homeunderdog bias. We illustrate that bettors have clear and predictable tendencies for betting on the best teams, and sports books do not appear to be operating as suggested by the balanced-book hypothesis
The chapter distinguishes three motives for match-fixing: to secure a sporting objective for a player or team; to change events on the field to enhance the interests of the competition organiser; and to allow gains from the betting market for parties within or outside the sport. Each type of match-fixing is viewed through the lens of economics. In the case of betting fixes, the framework adopted is that of a simple supply-demand model. The supply of fixes comes from actors within the sport and demand originates with criminals who seek to manipulate matches for betting gain. This framework allows both the identification of matches and competitions at greatest risk and insight into why there appears to have been a step increase in fixing since the Millennium, the latter closely related to a changing betting market. The framework also informs discussion of policy approaches to prevention, detection and mitigation of match-fixing.
Sports betting markets have grown very rapidly recently, with the total European gambling market worth 98.6 billion euro in 2019. Considering a high-resolution (1 Hz) data set provided by a large European bookmaker, we investigate the demand for bet placements during matches and in particular the effect of news. Accounting for the general market activity level within a state-space modelling framework, we analyse the market's response to events such as goals (i.e., major news). Our results indicate that markets strongly react to news, but other factors, such as the day of the week and the uncertainty of outcome, also affect the stakes placed. We thus provide insights into the behaviour of bettors during matches, which can be relevant for bookmakers, for example to predict future revenues, but also for more specialised tasks such as fraud detection.
Uncut Gems (2019) is a crime thriller, starring comedic actor Adam Sandler as a gambling addict and, more importantly for this collection, basketball fan. While there is no debate about the centrality of basketball to the story, as Howard’s fate depends on outcomes of professional basketball games which he is betting on, Uncut Gems is rarely seen as a basketball movie. Even though NBA games are shown in it only on television, the movie truly “gets” the sport while adhering to the common tropes of a typical basketball movie. Therefore in this chapter I firstly intend to justify my opinion that Uncut Gems is indeed a basketball movie by comparing it to other sports/basketball movies. Then I try to assess if a movie about basketball can “work” while depicting an immoral character––in this case a liar, a manipulator, and a gambler––with the sport itself deeply rooted in morality, and no redemption through the sport available, unlike in most basketball movies.
Are simple trading strategies profitable? It is a question that has been on the minds of academics and practitioners for decades. In this paper, we review the longstanding literature on trading strategies in spread betting (also known as handicap betting), a popular sports betting microstructure. We review over 600 strategy implementations and find that market efficiency and systematic misperceptions are not mutually exclusive per se. Predictable glitches occur, but they are too small to be profitably exploited which is consistent with efficient markets. Furthermore, while controlling for data mining issues is becoming mainstream in finance, it has not yet made its way into this literature. We provide evidence that the hurdle rate of | z| > 3 which has been put forward in the broader finance literature should also be used in betting market research.
Many earlier studies conducted on sports betting and addiction have examined sports betting in the context of gambling and have not taken into account the specific motivations of sports betting. Therefore, the effects of motivational elements of sports betting on sports betting addiction risk are unknown. The aim of the present study was to examine the effects of motivation factors specific to sports betting on sports betting addiction. Accordingly, three linked studies were conducted. Firstly, to determine sports betting motivations “Sports Betting Motivation Scale (SBMS)” developed and validated. Secondly, to determine the risks of sports betting addiction “The Problem Sports Betting Severity Index (PSBSI)” was adapted from Problem Gambling Severity Index (PGSI). Finally, the third study examined the effects of the sports betting motivations on sports betting addiction risk. Study one (n=281), study two comprised (n=230), and the final study comprised (n=643) sports fans who bet on sports regularly for 12 months with different motivations. The findings demonstrate that the SBMS appears to be a reliable and valid instrument for assessing sports betting motivations. Also, the findings provided PSBSI validity for the use of the Turkish and sports betting adapted version of PGSI. As a result of the main research, “make money”, “socialization,” and “being in the game” motivations were found to be positive predictors of sports betting addiction risk, while “fun” motivation was a negative predictor. The motivations “recreation/escape”, “knowledge of the game” and “interest in sport” were found not to be significant predictors of the risk of sports betting addiction.
The NCAA men’s basketball tournament is one of the most popular sporting events in the world and gives rise to a substantial betting market. This study uses data from 1996 to 2019 to examine efficiency in this market and to analyze whether bettors display any significant biases with respect to tournament seeding or conference affiliation of participants. The results indicate the market operates at an efficient level, with very little in the way of detectable bias based on seeding. The most noticeable anomaly is a tendency for teams from the Atlantic Coast Conference (ACC) to cover the spread less than would be expected in an efficient market, particularly in the opening round.
Pay-to-play (P2P) fantasy sports participation is growing rapidly. The combination of its resemblance to gambling and its exemption from regulation creates a significant public policy concern. For a sports fan with no interest in gambling, P2P fantasy sports may appear to be a safe and legal alternative. This research investigates that assumption by examining the relationship between sports fanship, fantasy sports, and gambling. First, two-part models are assessed to determine the likelihood of participation in P2P fantasy sports, sports betting, and online gambling and, conditionally, the amount spent on each of the three by those who participate. Second, a moderated-mediation model investigates the direct and indirect effects of fanship on P2P fantasy sports, sports betting, and online gambling. Results indicate that playing P2P fantasy sports leads to higher levels of sports betting and online gambling. Fans high in materialism engage directly in sports betting, but fans low in materialism engage through fantasy sports. Finally, the authors propose recommendations for public policy changes and private intervention.
Recent years have seen several match-fixing scandals in soccer. In order to avoid match-fixing, existing literature and fraud detection systems primarily focus on analysing betting odds provided by bookmakers. In our work, we suggest to not only analyse odds but also total volume placed on bets, thereby making use of more of the information available. As a case study for our method, we consider the second division in Italian soccer, Serie B, since for this league it has effectively been proven that some matches were fixed, such that to some extent we can ground truth our approach. For the betting volume data, we use a flexible generalized additive model for location, scale and shape (GAMLSS), with log-normal response, to account for the various complex patterns present in the data. For the betting odds, we use a GAMLSS with bivariate Poisson response to model the number of goals scored by both teams, and to subsequently derive the corresponding odds. We then conduct outlier detection in order to flag suspicious matches. Our results indicate that monitoring both betting volumes and betting odds can lead to more reliable detection of suspicious matches.
Sports betting is a popular economic activity in the United States. Sports betting can generate some negative externalities like disordered gambling and increased incentives to fix the outcomes of sporting events, and it also generates utility for those who wager responsibly. The United States has taken an unconventional approach to the regulation of sports betting, one that outlaws most types while making sports betting fully legal in one specific location. This regulatory approach does not address the underlying problems associated with gambling and it encourages illegal sports betting markets. It serves as a poor example of how sports betting should be regulated.
We demonstrate that there is a considerable variation in bookmaker margins across matches, time and bookmakers. Our results imply that using match, tournament and players’ characteristics explains the variations in margins hence, they can be helpful in managing intermediation cost in a market of state-contingent assets: fixed-odds betting markets. We also provide evidence that bookmakers protect themselves by increasing odds on the favourite player, thus attracting more bettors to the favourite player, while deterring bettors from betting on the underdog by reducing the odds. By that process, bookmakers are possibly sacrificing a portion of their margin.
Television ratings for Sunday and Monday night NFL football are examined using betting market prices as explanatory variables. Primetime broadcasts are shown to respond positively to the win percentages of the teams playing and the expected amount of scoring measured by the betting market total. The point spread, measuring uncertainty of outcome, is found to have a negative, but insignificant effect on ratings. Betting market volume is shown to be influenced by the same factors as ratings, and the residuals of betting volume, known before the game is played, is shown to have a positive and significant effect on ratings.
In response to the increasing debate on the relative worth of small events compared to large events, we create a theoretical model to determine whether smaller events are more likely to create positive economic impact. First, event size and city size are redefined as continuums of resources. The concepts of event resource demand (ERD) and city resource supply (CRS) are introduced, allowing for a joint analysis of supply and demand. When local economic conditions are brought into the analysis, the framework determines how a city resource deficiency or surplus affects the economic impact of an event. This resource-based approach assists public officials and event organizers in making more rational decisions for hosting events when they pursue positive economic impacts. Specifically, we find small events have a higher potential for positive economic impact and hosting multiple smaller-sized events is a better strategy than hosting a big event.
Although the fact that sports lottery has become a prevalent phenomenon, it remains an under-researched area in sport management literature. Based on Conlisk's (1993) theory on the utility of gambling, an econometric model of demand for sports lottery gambling was constructed. The model assumes an experiential utility associated with sports lottery gambling, and proposes that rational consumers are mainly motivated by product attributes and marketing variables. The model is empirically examined by using a set of draw-to-draw sales data of a sports lottery in China. Time series analyses were conducted to analyze the determinants of sports lottery demand. This study revealed that ticket composition had considerable impact on the demand after partialling out information through the inclusion of an ex-post Prediction Difficulty Coefficient in the regression model. Eight percent of variance in the demand for sports lottery was found to be associated with ticket composition variables. The results provide additional evidence to the existing literature on sports gambling as consumption. The notion that nonmonetary activities associated with sports lottery gaming have a consumption value has considerable implications in terms of designing lottery products and delivering value to its consumers.
Recent research has hypothesized that a higher concentration of informed traders in a market implies that prices are more efficient. A reasonable next question is whether large price movements in markets with a relatively more informed clientele are more indicative of information realization. We find line movements in college basketball games of relatively low profile, denoted by the lack of a “power conference” team in the contest, are significantly more likely to be the result of information realization. This confirms that substantial price changes in markets with fewer ordinary traders are more (less) likely indicative of information flow (noise).
The National Basketball Association (NBA) and National Hockey League (NHL) are studied to ascertain the determinants of betting volume on an individual game-to-game basis. Actual betting volume was obtained and aggregated across three on-line sportsbooks for the 2008-09 season. Independent variables such as the quality of teams, television coverage by network, day of the week, time of day, month of the season, etc. are included in a regression model to determine the factors that influence betting volume. The results reveal betting behavior is much like fan behavior as key fan-attributes, such as the quality of teams and the availability of television coverage, are shown to have a positive and significant effect on betting volume. The results imply that consumption plays a major role in the decision to gamble on sports. Pure investment-based gambling appears to be the exception, rather than the norm. The implication of this result as it relates to models of sportsbook behavior is explored.
Efficient markets in college football are tested over a 25-year period, 1976–2000. the market in general is found to be efficient,
but betting on underdogs of more than 28 points violates a fair bet. The strategy of betting home underdogs reveals stronger
results. Home underdogs of more than seven points are found to reject the null hypotheses of a fair bet over the last 10 years
of the sample, 1991–2000. Home underdogs of more than 28 points are found to reject the null of no profitability during the
same time frame.
Levitt (2004) suggested that sportsbooks do not set prices in the NFL to clear markets, as was commonly assumed, but set prices to maximize profits. This paper uses actual betting data from four sportsbooks to test the Levitt (2004) hypothesis in the NBA. For a sample of the 2004-05 to 2006-07 seasons, it is shown that favorites receive a disproportionate share of NBA pointspread bets. In addition, the percentage of bets the favorite receives increases with each additional point of the pointspread. In the totals market, it is shown that overs receive a much higher percentage of bets compared to unders and the percentage bet on the over increases with each point of the total. Unlike the NFL, however, taking a contrarian position and betting against public sentiment is not found to win more often than implied by efficiency.
Wagering markets provide a natural laboratory for testing models of market prices and behavior under uncertainty. The literature on wagering, albeit contentious, has established the following. First, prices set in these markets, to a first approximation, are efficient forecasts of outcomes. Second, price changes in these markets are driven by an informed class of bettors and improve prediction. Nevertheless, there are important departures from generic notions of market efficiency. Recent models focusing on diverse information, heterogeneous agents, and transaction costs help to explain these findings.
This paper provides an economic analysis of illegal sports bookmaking using detailed records from six bookmakers who operated in the 1990s. These operations are struc- tured like standard firms and utilize incentive contracts to induce appropriate employee behavior. The bookmakers oer prices which closely follow the geographically sepa- rated legal market, but larger operations price discriminate based on individual betting patterns. Despite the availability of inexpensive hedging instruments, all operations take on substantial financial risk. This implies the bookmakers cannot be risk-averse and must hold large cash reserves. The risk-adjusted profit rate is lower than in legal financial markets. These results and behaviors are consistent with standard models of economic self-interest.
We show that prospect theory offers a rich theory of casino gambling, one that captures several features of actual gambling behavior. First, we demonstrate that for a wide range of preference parameter values, a prospect theory agent would be willing to gamble in a casino even if the casino offers only bets with no skewness and with zero or negative expected value. Second, we show that the probability weighting embedded in prospect theory leads to a plausible time inconsistency: at the moment he enters a casino, the agent plans to follow one particular gambling strategy; but after he starts playing, he wants to switch to a different strategy. The model therefore predicts heterogeneity in gambling behavior: how a gambler behaves depends on whether he is aware of the time inconsistency; and, if he is aware of it, on whether he can commit in advance to his initial plan of action.
This paper was accepted by Brad Barber, Teck Ho, and Terrance Odean, special issue editors.
This study shows that the propensity to gamble and investment decisions are correlated. At the aggregate level, individual investors prefer stocks with lottery features, and like lottery demand, the demand for lottery-type stocks increases during economic downturns. In the cross-section, socioeconomic factors that induce greater expenditure in lotteries are associated with greater investment in lottery-type stocks. Further, lottery investment levels are higher in regions with favorable lottery environments. Because lottery-type stocks underperform, gambling-related underperformance is greater among low-income investors who excessively overweight lottery-type stocks. These results indicate that state lotteries and lottery-type stocks attract very similar socioeconomic clienteles.
The predictions of the traditional balanced-book sportsbook model and the alternative Levitt model of sportsbook behavior are tested using actual betting percentages on the favorite/underdog and over/under for NCAA Football. Sportsbooks are found to not balance betting dollars, which is in contradiction to the assumptions of the traditional models of sportsbook behavior. In the pointspread market, more bets are placed on the favorite in contests with road favorites and in games with higher pointspreads. In the totals market, more bets are placed on the over as the total increases and in games on television. Some support is found for the Levitt model of sportsbook behavior, as sportsbooks appear to price to maximize profits when the behavioral biases of bettors are clear, such as games with road favorites and games with the highest pointspreads and totals. In all other contests, however, the sportsbook appears to price as a forecast, as each proposition wins half of the time, even in the presence of betting imbalances.
Nielsen ratings for Monday Night Football are analyzed through regression models to determine the factors that attract and keep viewers. For start-of-game ratings, the uncertainty of outcome, quality of the teams, and expected scoring are shown to be important factors. For within-game changes in ratings, the halftime score differential and halftime total points scored, in addition to the quality of teams playing the game, are shown to be significant determinants. Evidence is found that fans prefer games with a quality match-up between winning teams, a high level of uncertainty of outcome, and high-scoring.
In this paper we relate individual risk attitude as elicited by binary lottery choices to market behavior. By analyzing 26 independent experimental markets with a total of 280 participants, we show that binary lottery choices are systematically correlated with market behavior: the higher the degree of risk aversion the lower the observed market activity. Our results also uncover gender differences in risk attitude, which moderate market behavior. We find that women are more risk averse than men, submit fewer offers, and engage less often in trades.
The Levitt (2004) model of sportsbook behavior is tested using actual
percentages of dollars bet on NFL games from the internet sportsbook,
Sportsbook.com. Simple regression results suggest that Sportsbook.com
sets pointspreads (prices) to maximize profits, as the Levitt model
assumes, not to balance the betting dollars, as the traditional model
of sportsbook behavior assumes. Sportsbook.com is found to accept
significantly more wagering dollars on road favorites, larger favorites,
and on the over for the highest totals in the over/under betting
market. Bettor liquidity constraints and sportsbook betting limits
may help explain this result.
"The purpose of this study is to analyze whether previous results describing the effect of uncertainty of outcome on match attendance in team sports have been driven by heterogeneity in fan demand. We apply censored quantile regression methods and place particular emphasis on the relationship between match uncertainty and attendance demand, as previous results are highly ambiguous. This is more surprising, as each season association and league officials continue to spend millions on enhancing this uncertainty. We also control for season ticket holders, who are unlikely to be influenced by match specificities. Based on data from German soccer, our results indicate that fan demand shows heterogeneity across quantiles and that increasing match uncertainty of outcome exclusively benefits teams who already face strong attendance demand. "("JEL "D12, C14, C24, L83) Copyright (c) 2008 Western Economic Association International.
Two statistical tests are common for testing the efficiency market hypothesis (EMH) in gambling markets. One test is based on the idea that betting lines should be unbiased predictors of actual game outcomes. An alternative test is (in the absence of vigorish) whether there is a 0.5 probability of winning a bet. This article demonstrates that these two tests are not identical, and that the second test is a more useful test. Both test are applied to data from the 1988 NFL football season for both the Las Vegas betting line and the over-and-under line for pre-season, regular season and post-season games. The unbiased predictor test rejects the EMH for pre-season games. The 0.5 test is unable to reject the EMH for both betting lines and all sets of games.
Existing lotto demand models utilize effective price, computed as the face value of a ticket minus the expected value of prize money per ticket, as their primary explanatory variable. By contrast, this article proposes a key role for consumption benefit or "fun" in the demand for gambling in general and lotto demand in particular. It develops an alternative model of lotto demand that focuses on the maximum possible prize. When this is tested against the traditional model using data from the U.K. National Lottery, we find that jackpot considerations exert an influence over and above that of variations in effective price. Copyright 2002, Oxford University Press.
A tiny utility of gambling is appended to an expected utility model for a risk-averse individual. It is shown that the model can explain small payoff gambles, large prize lotteries, and patterns of risk-seeking in the experimental evidence that are puzzling from the viewpoint of standard theory. At the same time, the model maintains expected utility theory's ability to explain insurance purchase, portfolio diversification, and other risk-averting behavior. The tiny utility of gambling could equally well be appended to models of risky choice other than the expected utility model. Copyright 1993 by Kluwer Academic Publishers
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
Analysis of decision making under risk has been dominated by expected utility theory, which generally accounts for people's actions. Presents a critique of expected utility theory as a descriptive model of decision making under risk, and argues that common forms of utility theory are not adequate, and proposes an alternative theory of choice under risk called prospect theory. In expected utility theory, utilities of outcomes are weighted by their probabilities. Considers results of responses to various hypothetical decision situations under risk and shows results that violate the tenets of expected utility theory. People overweight outcomes considered certain, relative to outcomes that are merely probable, a situation called the "certainty effect." This effect contributes to risk aversion in choices involving sure gains, and to risk seeking in choices involving sure losses. In choices where gains are replaced by losses, the pattern is called the "reflection effect." People discard components shared by all prospects under consideration, a tendency called the "isolation effect." Also shows that in choice situations, preferences may be altered by different representations of probabilities. Develops an alternative theory of individual decision making under risk, called prospect theory, developed for simple prospects with monetary outcomes and stated probabilities, in which value is given to gains and losses (i.e., changes in wealth or welfare) rather than to final assets, and probabilities are replaced by decision weights. The theory has two phases. The editing phase organizes and reformulates the options to simplify later evaluation and choice. The edited prospects are evaluated and the highest value prospect chosen. Discusses and models this theory, and offers directions for extending prospect theory are offered. (TNM)
The market for sports gambling is structured very differently from the typical financial market. In sports betting, bookmakers announce a price, after which adjustments are small and infrequent. Bookmakers do not play the traditional role of market makers matching buyers and sellers but, rather, take large positions with respect to the outcome of game. Using a unique data set, I demonstrate that this peculiar price-setting mechanism allows bookmakers to achieve substantially higher profits. Bookmakers are more skilled at predicting the outcomes of games than bettors and systematically exploit bettor biases by choosing prices that deviate from the market clearing price. Copyright 2004 Royal Economic Society.
Dahlby 2009-14 A Median Voter Model of the Vertical Fiscal Gap – Dahlby, Rodden, Wilson 2009-13 A New Look at Copper Markets: A Regime-Switching Jump Model – Chan
- Da Braido
- Costa
Adverse Selection and Risk Aversion in Capital Markets – Braido, da Costa, Dahlby
2009-14 A Median Voter Model of the Vertical Fiscal Gap – Dahlby, Rodden, Wilson
2009-13 A New Look at Copper Markets: A Regime-Switching Jump Model – Chan, Young
2009-12 Tort Reform, Disputes and Belief Formation – Landeo