Are Betting Markets Inefficient? Evidence From Simulations and Real Data

David Winkelmann, Marius Ötting, Christian Deutscher and Tomasz Makarewicz

Journal of Sports Economics, 2024, vol. 25, issue 1, 54-97

Abstract: Previous literature leaves the impression that betting market inefficiencies are widespread. However, most studies rely upon limited data and ignore biases’ persistence. Our simulation-based analyses show (1) the impact of low sample sizes on the chance to detect markets that only appear to be efficient and (2) the frequency of observing inefficient periods within fully efficient markets. Afterwards, we (3) empirically analyze real-world football betting markets for 14 consecutive seasons. While inefficiencies occur in singular seasons, they are not persistent or systematic across leagues. Moreover, our simulation-based analyses suggest that statistically significant effects in single seasons are likely to be observed even under full market efficiency.

Keywords: betting markets; biases; market efficiency; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: G14 L83 Z23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:25:y:2024:i:1:p:54-97

DOI: 10.1177/15270025231204997

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