Evidence of Betting Market Intra-Season Efficiency and Inter-Season Over-Reaction to Unexpected NFL Team Performance 1988-2006

24 Pages Posted: 25 Sep 2007

See all articles by Steven G. Sapra

Steven G. Sapra

Analytic Investors, Inc.; Claremont Graduate University

Date Written: June 30, 2007

Abstract

A structural model is derived describing the relationship between the probability that the favored team is victorious and the point spread through the use of a "no-arbitrage" condition. A series of probit models are developed which show that NFL wagering markets were efficient within season between 1988-2006 and that the point spread is a statistically-significant indicator of probability of victory. A team-level excess performance metric is estimated, termed "NFL Alphas", which indicates the extent to which a team's on-the-field performance exceeded betting market expectations. Finally, it is shown that there exists a market over-reaction effect for NFL Alphas across seasons.

Keywords: sports betting, market efficiency, probit, NFL, alpha

JEL Classification: G14

Suggested Citation

Sapra, Steven, Evidence of Betting Market Intra-Season Efficiency and Inter-Season Over-Reaction to Unexpected NFL Team Performance 1988-2006 (June 30, 2007). Available at SSRN: https://ssrn.com/abstract=1016745 or http://dx.doi.org/10.2139/ssrn.1016745

Steven Sapra (Contact Author)

Analytic Investors, Inc. ( email )

555 W. 5th St.
50th Floor
Los Angeles, CA 90013
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213-688-3015 (Phone)
213-688-8856 (Fax)

HOME PAGE: http://www.analyticinvestors.com

Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

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