Are Sports Betting Markets Semistrong Efficient? Evidence from the COVID-19 Pandemic

International Journal of Sport Finance, 16(3), https://doi.org/10.32731/IJSF/163.082021.01

University of Zurich, Institute of Business Administration, UZH Business Working Paper No. 387

34 Pages Posted: 19 Aug 2020 Last revised: 13 Sep 2021

See all articles by Pascal Flurin Meier

Pascal Flurin Meier

University of Zurich - Department of Business Administration (IBW)

Raphael Flepp

University of Zurich - Department of Business Administration (IBW)

Egon P. Franck

University of Zurich - Department of Business Administration (IBW)

Date Written: August 24, 2021

Abstract

This paper examines whether sports betting markets are semistrong-form efficient—i.e., whether new information is rapidly and completely incorporated into betting prices. We use the news of ghost matches in the top European football leagues due to the COVID-19 pandemic as the arrival of public information. Because spectators are absent in ghost games, the home field advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers systematically overestimate a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semistrong-form efficient. We exploit a betting strategy that yields a positive net payoff over more than one month.

Keywords: Sports Betting Market, Market Efficiency, Home Advantage, COVID-19

JEL Classification: G14, L83, Z2

Suggested Citation

Meier, Pascal Flurin and Flepp, Raphael and Franck, Egon P., Are Sports Betting Markets Semistrong Efficient? Evidence from the COVID-19 Pandemic (August 24, 2021). International Journal of Sport Finance, 16(3), https://doi.org/10.32731/IJSF/163.082021.01, University of Zurich, Institute of Business Administration, UZH Business Working Paper No. 387, Available at SSRN: https://ssrn.com/abstract=3676515 or http://dx.doi.org/10.2139/ssrn.3676515

Pascal Flurin Meier (Contact Author)

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

Plattenstrasse 14
Zurich, 8032
Switzerland

Raphael Flepp

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

Plattenstrasse 14
Zurich, 8032
Switzerland

Egon P. Franck

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

Plattenstrasse 14
Zurich 8032
Switzerland
+41 1 634 28 45 (Phone)

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