Informed Traders and Balanced Books

Richard Borghesi

Journal of Prediction Markets, 2015, vol. 9, issue 2, 32-42

Abstract: We explore sports gambler and bookmaker behavior by examining the pregame price movements of sports contracts listed on the Tradesports betting exchange. The vast majority of prior gambling studies that examine the price efficiency of bookmaker-style betting markets and the associated informational processing ability of bettors rely on the balanced book assumption. But, on Tradesports, bet prices are directly observable and therefore we are not required to assume that the point spreads set by bookmakers are a reliable proxy for the market’s dollar-weighted vote on contest outcome. We find that pregame NBA and NFL contract price movements are reliable predictors of future contract values. The magnitude of these movements is sufficient to remove the possibility of profit-taking by tipoff/kickoff. Results are consistent with the notion that in bookmaker-style NBA betting markets there exist informed traders and that lines are set at levels that balance wagers on either side of the bet. However, NFL bookmakers may allow (or perhaps encourage) imbalanced wagering in order to exploit relatively unskilled NFL bettors.

Keywords: Prediction Market; Tradesports; Sports Betting; Informed Traders; Balanced Books. (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://ubplj.org/index.php/jpm/article/view/1036 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:buc:jpredm:v:9:y:2015:i:2:p:32-42

Ordering information: This journal article can be ordered from
http://www.predictio ... ex_files/Page418.htm

Access Statistics for this article

Journal of Prediction Markets is currently edited by Leighton Vaughan Williams, Nottingham Business School

More articles in Journal of Prediction Markets from University of Buckingham Press
Bibliographic data for series maintained by Dominic Cortis, University of Malta ().