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
Date Written: June 30, 2007
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: Suggested Citation