Using Betting Market Odds to Measure the Uncertainty of Outcome in Major League Baseball

Betting market odds for Major League Baseball are used to examine the level of uncertainty of outcome and the perceived level of competitive balance. The efficient markets hypothesis cannot be rejected for the years 1990-2006 in Major League Baseball. Therefore, the odds provide an ex-ante measure of the uncertainty of outcome of baseball games in the minds of fans and bettors. The odds for both the American and National Leagues were shown to increase during the 1990s, implying a lower level of the uncertainty of outcome. Bettors and fans believed favorites in Major League Baseball were more likely to win during this time frame. Differences in the average odds, formed ex-ante, compared to win percentages, formed ex-post, help to explain the dichotomy found in Schmidt and Berri (2001) in relation to perception versus reality concerning competitive balance in Major League Baseball.

Keywords: Major League Baseball, Odds, Competitive Balance

JEL Classification: L83

Suggested Citation: Suggested Citation

Paul, Rodney and Weinbach, Andrew P. and Borghesi, Richard and Wilson, Mark, Using Betting Market Odds to Measure the Uncertainty of Outcome in Major League Baseball (July 15, 2008). International Journal of Sport Finance 4(4), 255-263, 2008, Available at SSRN: https://ssrn.com/abstract=2149715