Yes, One-Day International Cricket ‘In-Play’ Trading Strategies Can Be Profitable!

39 Pages Posted: 14 Jul 2014

See all articles by Hugh Norton

Hugh Norton

University of Queensland - Business School

Stephen Gray

University of Queensland - Business School; Duke University - Fuqua School of Business; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Date Written: July 13, 2014

Abstract

In this study, we employ a Monte Carlo simulation technique for estimating the probability of victory at any stage in the first or second innings of a one-day international (ODI) cricket match. This model is then used to test market efficiency in the Betfair ‘in-play’ market for a large sample of ODI matches. We find strong evidence of overreaction in the first innings. A trading strategy of betting on the batting team after the fall of a wicket produces a significant profit of 20%. We also find some evidence of underreaction in the second innings, although it is less economically and statistically significant than the first innings overreaction. We also implement trades when the discrepancy between the probability of victory implied by current market odds differs substantially from the odds estimated by our Monte Carlo simulation. We document a number of trading strategies that yield large statistically significant positive returns in both the first and second innings.

Keywords: in-play betting markets, Trading strategies, ODI Cricket, web-scraping, Monte Carlo simulation

Suggested Citation

Norton, Hugh and Gray, Stephen and Faff, Robert W., Yes, One-Day International Cricket ‘In-Play’ Trading Strategies Can Be Profitable! (July 13, 2014). Available at SSRN: https://ssrn.com/abstract=2465536 or http://dx.doi.org/10.2139/ssrn.2465536

Hugh Norton

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Stephen Gray

University of Queensland - Business School ( email )

University of Queensland
Brisbane, Queensland 4072
Australia

Duke University - Fuqua School of Business

Box 90120
Durham, NC 27708-0120
United States

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Robert W. Faff (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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