Behavioral Home Bias in a Real Market Setting: Evidence from Online Sports Betting

38 Pages Posted: 17 Nov 2020 Last revised: 25 Oct 2021

Date Written: October 21, 2021

Abstract

We study the home bias using individual-level data from an online sports-betting market. Contrary to other markets where home bias is confounded by institutional and information frictions, our market's experimental-like features enable us to test cleanly whether the psychological drivers of the home bias are strong enough to survive significant welfare costs. We find that individuals exhibit a bias toward home teams, which does not yield superior performance but distorts portfolios, generating welfare costs of similar magnitude as in the stock market. Our findings help solidify the foundation of the behavioral explanation of the home bias in other real markets.

Keywords: Individual Decision-making, Behavioral Bias, Local Bias, Home Bias, Sentiment, Information, Joint Hypothesis

JEL Classification: D91, G41, D12, D81, G11, G14, G50

Suggested Citation

Andrikogiannopoulou, Angie and Papakonstantinou, Filippos, Behavioral Home Bias in a Real Market Setting: Evidence from Online Sports Betting (October 21, 2021). Available at SSRN: https://ssrn.com/abstract=3701247 or http://dx.doi.org/10.2139/ssrn.3701247

Angie Andrikogiannopoulou

King’s College London

Strand
London, England WC2R 2LS
United Kingdom

Filippos Papakonstantinou (Contact Author)

King’s College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

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