Is herding efficient? Evidence from the college football point spread market

Alexander Traugutt () and Jarid Morton ()
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Alexander Traugutt: Elon University
Jarid Morton: Western Kentucky University

Economics Bulletin, 2022, vol. 42, issue 3, 1673 - 1680

Abstract: This study examined the efficiency of herd behavior in the college football point spread market during the 2020-21 season, which was significantly impacted by the coronavirus pandemic. The virus caused chaos throughout the sport, which featured empty stadiums, infectious outbreaks, and scheduling disruptions. These uncertainties created an information gap, particularly regarding player availability, for sports bettors who utilize these types of data to build their models. As such, this market coupled with the pandemic backdrop provides an optimal setting to test the efficiency of herd behavior. Results indicated that the market was statistically inefficient, and from a herding standpoint, contrarian strategies resulted in win percentages that exceeded 50% for various probability cutoffs. This research presents applicable findings related to psychological factors that influence investor behavior, which can be generalized to markets within and outside of sport.

Keywords: herd behavior; market efficiency; college football; sports betting; pandemic (search for similar items in EconPapers)
JEL-codes: G1 L8 (search for similar items in EconPapers)
Date: 2022-09-30
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