The ‘Sleeping Giant’: A Behavioral Anomaly in Prediction Markets

Atharva Vaze
Additional contact information
Atharva Vaze: RoboThink

No w32ue_v1, SocArXiv from Center for Open Science

Abstract: This paper explores a behavioral phenomenon in sports economics: human tendencies to overbet on more well-known teams—known as “dynasties”—in playoff series, especially when these teams are statistical underdogs. In an emerging world of prediction markets, it is important to not only identify market inefficiencies but also to understand the underlying behavioral factors, as this phenomenon may be present in other liquid markets. Using 12 seasons of NBA betting data (2008–2020) with Elo-based benchmarks, this study found betting markets tend to overprice dynasty underdogs by a mean bias of +10.43 percentage points (p < 0.0001), while non-dynasty underdogs show no statistically significant bias (+0.08pp, p = 0.82), confirming the effect is identity-specific rather than general model error. This mispricing yields a betting strategy with +15.81% gross ROI (62.9% win rate) and persists across the full 12-season sample despite high market liquidity. These findings show that bettors systematically overweight team reputation, creating mispricings that persist despite being exploitable.

Date: 2026-02-18
New Economics Papers: this item is included in nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://osf.io/download/698f907513f8ed4489dfc7b6/

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:osf:socarx:w32ue_v1

DOI: 10.31219/osf.io/w32ue_v1

Access Statistics for this paper

More papers in SocArXiv from Center for Open Science
Bibliographic data for series maintained by OSF ().