EconPapers    
Economics at your fingertips  
 

Calculating The Bookmaker's Margin: Why Bets Lose More On Average Than You Are Warned

Karl Whelan and Tadgh Hegarty

MPRA Paper from University Library of Munich, Germany

Abstract: If betting markets are efficient, then the expected loss rate on all bets on a game can be calculated from the quoted odds. Guides to sports betting tell bettors how to do this calculation of the predicted average loss rate. We show that if bookmakers set higher profit margins for bets with lower probabilities of winning (as implied by the evidence on favorite-longshot bias) then average loss rates across all bets will be higher than predicted by this widely-recommended calculation. We provide evidence from betting on soccer and tennis to illustrate that average realized loss rates on bets are consistently higher than predicted by the conventional calculation.

Keywords: Market Efficiency; Sports Betting; Favorite-Longshot Bias (search for similar items in EconPapers)
JEL-codes: G14 L83 (search for similar items in EconPapers)
Date: 2023-02-22
New Economics Papers: this item is included in nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/116924/1/MPRA_paper_116924.pdf original version (application/pdf)

Related works:
Working Paper: Calculating The Bookmaker's Margin: Why Bets Lose More On Average Than You Are Warned (2023) Downloads
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:pra:mprapa:116924

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2024-02-07
Handle: RePEc:pra:mprapa:116924