Next game reaction to mispriced betting lines in college football

Randall W. Bennett

Applied Economics Letters, 2021, vol. 28, issue 12, 1006-1009

Abstract: Although studies show the point spread is a very good predictor of actual score differences in college football, there are a number of games each season where the betting line is not close to the actual spread. This article investigates the efficiency of the college football betting market for the game following one with a large difference between betting and actual point spreads for the 2006–2018 seasons. For the entire sample, the simple rule of betting for teams that greatly beat the spread and against teams that did very poorly against the spread in the previous game wins significantly more than half the time. When the results are analysed separately for the better known BCS/Power 5 schools and the lesser known non-BCS/Power 5 schools, efficiency cannot be rejected for games involving the BCS/Power 5 teams. For games involving two non-BCS/Power 5 teams, however, following the betting rule wins against the spread 54.23% of the time, which is significantly greater than 50%. This is consistent with an information gap scenario, where new information is more efficiently incorporated for games involving better-known participants.

Date: 2021
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DOI: 10.1080/13504851.2020.1795063

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