Testing Market Efficiency: Evidence from the NFL Sports Betting Market

Philip K Gray and Stephen F Gray

Journal of Finance, 1997, vol. 52, issue 4, 1725-37

Abstract: This article examines the efficiency of the National Football League betting market. The standard ordinary least squares regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows the authors to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In-sample tests indicate that probit-based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out-of-sample testing, there is some inconsistency among the remaining out-of-sample predictions. The authors' results also suggest that widely documented inefficiencies in this market tend to dissipate over time. Copyright 1997 by American Finance Association.

Date: 1997
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