The Late-Season Bias: Explaining the NFL’s Home Underdog Effect
34 Pages Posted: 22 Sep 2012
Date Written: 2007
Abstract
This paper examines price efficiency and out-of-sample predictability in the NFL point spread betting market. Our main contribution to the existing literature is the identification of a persistent increase in bias magnitude during the final few weeks of each season. We demonstrate that this anomaly causes the much-documented home underdog effect. We also offer evidence that the limits of arbitrage have enabled this phenomenon to persist for decades. Finally, we use several regression models to confirm our statistical analysis, and show that these models can be used to implement profitable betting strategies. The predictive models presented differ from those in the prior literature by taking into account both short-term and aggregate biases.
Keywords: NFL, Late Season, Home Underdog
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