Behavioral Biases in the NFL Gambling Market: Overreaction to News and the Recency Bias

33 Pages Posted: 16 Jun 2021

See all articles by Robert B. B. Durand

Robert B. B. Durand

Curtin University of Technology - School of Economics and Finance - Department of Finance and Banking

Fernando Patterson

North Carolina Central University (NCCU)

Corey A. Shank

Miami University

Date Written: February 2021

Abstract

This paper examines the recency bias and overreaction in the NFL betting market from 2003 to 2017. Consistent with the recency bias, bettors are more likely to bet on teams who have won previous outcomes. We add to the literature and find that the magnitude of prior wins and losses in the previous weeks' plays a greater importance than the sole outcome of wins and losses in betting behavior. Additionally, our results show that bettors wager 2.1% less on the home team when their first-string quarterback does not play, and 3.1% more on the home team when the visitor's first-string quarterback does not play, which is consistent with overreaction. Finally, our results show that bookmakers earn "over the odds" thanks to bettors' quasi-rational behavior as they commit the recency bias.

Keywords: Overreaction, Recency Bias, Behavioral Bias, NFL, Gambling

JEL Classification: G1, G4, L83

Suggested Citation

Durand, Robert B. B. and Patterson, Fernando and Shank, Corey, Behavioral Biases in the NFL Gambling Market: Overreaction to News and the Recency Bias (February 2021). Available at SSRN: https://ssrn.com/abstract=3861231 or http://dx.doi.org/10.2139/ssrn.3861231

Robert B. B. Durand

Curtin University of Technology - School of Economics and Finance - Department of Finance and Banking ( email )

Bentley 6102 WA
Australia

HOME PAGE: http://tiny.cc/y85rh

Fernando Patterson

North Carolina Central University (NCCU) ( email )

Durham, NC 27707
United States

Corey Shank (Contact Author)

Miami University ( email )

Oxford, OH 45056
United States

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