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http://ssrn.com/abstract=1503350
 
 

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Prediction Accuracy of Different Market Structures - Bookmakers Versus a Betting Exchange


Egon P. Franck


University of Zurich - Department of Business Administration (IBW)

Erwin Verbeek


University of Zurich - Department of Business Administration (IBW)

Stephan Nüesch


University of Muenster

November 10, 2009

International Journal of Forecasting, Vol. 26, No. 3, pp. 448-459, 2010
ISU Working Paper No. 96

Abstract:     
There is a well-established literature on separately testing the prediction power of different betting market settings. This paper provides an inter-market comparison of the forecasting accuracy between bookmakers and a major betting exchange. Employing a dataset covering all football matches played in the major leagues of the “Big Five” (England, France, Germany, Italy, Spain) during three seasons (5478 games in total), we find evidence that the betting exchange provides more accurate predictions of the same underlying event than bookmakers. A simple betting strategy of selecting bets for which bookmakers offer lower probabilities (higher odds) than the bet exchange generates above average and, in some cases, even positive returns.

Number of Pages in PDF File: 26

Keywords: prediction accuracy, betting, bookmaker, bet exchange, probit regression

JEL Classification: D12, D21, D81, G14

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Date posted: November 24, 2010  

Suggested Citation

Franck, Egon P. and Verbeek, Erwin and Nüesch, Stephan, Prediction Accuracy of Different Market Structures - Bookmakers Versus a Betting Exchange (November 10, 2009). International Journal of Forecasting, Vol. 26, No. 3, pp. 448-459, 2010. Available at SSRN: http://ssrn.com/abstract=1503350 or http://dx.doi.org/10.2139/ssrn.1503350

Contact Information

Egon P. Franck
University of Zurich - Department of Business Administration (IBW) ( email )
Plattenstrasse 14
Zurich 8032
Switzerland
+41 1 634 28 45 (Phone)
Erwin Verbeek
University of Zurich - Department of Business Administration (IBW) ( email )
Plattenstrasse 14
Zurich, 8032
Switzerland
Stephan Nüesch (Contact Author)
University of Muenster ( email )
Am Stadtgraben 9
Muenster, D-48143
Germany
HOME PAGE: http://www.wiwi.uni-muenster.de/uf
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