Inter-Market Arbitrage in Betting

Economica, Forthcoming

44 Pages Posted: 29 Nov 2010 Last revised: 20 Feb 2012

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

Date Written: January 30, 2012

Abstract

We show that a combined bet at the bookmaker and at the bet exchange market yields a guaranteed positive return in 19.2% of the matches in the top-five European soccer leagues. Moreover, we find that all considered bookmakers frequently offered arbitrage positions, and that they experienced, on average, negative margins from these postings. Our findings indicate that bookmakers set prices not only by optimising over a particular bet, but also by taking the future trading behaviour of their customers into account. We discuss the implications for the literature on the relationship between betting market structure and informational efficiency.

Keywords: Betting, Arbitrage, Bookmaker, Bet Exchange, Informational Efficiency

JEL Classification: D4, G1, G14

Suggested Citation

Franck, Egon P. and Verbeek, Erwin and Nüesch, Stephan, Inter-Market Arbitrage in Betting (January 30, 2012). Economica, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1503375 or http://dx.doi.org/10.2139/ssrn.1503375

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 (Contact Author)

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Stephan Nüesch

University of Muenster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/uf

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