Exploiting the 'Win But Does Not Cover' Phenomenon in College Basketball

20 Pages Posted: 12 Jan 2018

See all articles by Jason P. Berkowitz

Jason P. Berkowitz

St. John's University - Department of Economics and Finance

Craig A. Depken II

University of North Carolina (UNC) at Charlotte

John Gandar

University of North Carolina (UNC) at Charlotte

Date Written: February 2018

Abstract

Wolfers (2006) was the first to document that heavy favorites in college basketball win but fail to cover the pre‐game point spread at a statistically higher rate than expected. We generate a hedged strategy to exploit the “win but does not cover” phenomenon using two wagers: a bet on the underdog sides line and a bet on the favorite money line. While one bet is guaranteed to win regardless of the outcome, both bets win if the favorite wins but does not cover. We show that the minimum‐variance portfolio best exploits this anomaly, yielding an average return of 0.34% per game and a positive return in five of the seven seasons of college basketball analyzed.

Keywords: portfolio selection, minimumā€variance portfolio, betting markets

JEL Classification: G11, Z23, L83

Suggested Citation

Berkowitz, Jason P. and Depken II, Craig A. and Gandar, John, Exploiting the 'Win But Does Not Cover' Phenomenon in College Basketball (February 2018). Financial Review, Vol. 53, Issue 1, pp. 185-204, 2018. Available at SSRN: https://ssrn.com/abstract=3100460 or http://dx.doi.org/10.1111/fire.12155

Jason P. Berkowitz (Contact Author)

St. John's University - Department of Economics and Finance ( email )

Jamaica, NY 11439
United States

Craig A. Depken II

University of North Carolina (UNC) at Charlotte

9201 University City Boulevard
Charlotte, NC 28223
United States

John Gandar

University of North Carolina (UNC) at Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States

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