Are sports betting markets semistrong efficient? Evidence from the COVID-19 pandemic

Pascal Flurin Meier (), Raphael Flepp () and Egon Franck
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Pascal Flurin Meier: Department of Business Administration, University of Zurich
Raphael Flepp: Department of Business Administration, University of Zurich

No 387, Working Papers from University of Zurich, Department of Business Administration (IBW)

Abstract: This paper examines whether sports betting markets are semistrong-form efficient — i.e., whether new information is rapidly and completely incorporated into betting prices. We use news on ghost games in the top European football leagues due to the COVID-19 pandemic as a clean arrival of new public information. Because spectators are absent during ghost games, the home advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers and betting exchanges systematically overestimated a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semistrong-form efficient. Examining different leagues, we find that our main results are driven by the German Bundesliga, which was the first league to resume operations. We exploit a betting strategy that yields a positive net payoff over more than one month.

Keywords: Sports Betting Market; Market Efficiency; Home Advantage; COVID-19 (search for similar items in EconPapers)
JEL-codes: G14 L83 Z2 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2021-08
New Economics Papers: this item is included in nep-eur, nep-isf and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zrh:wpaper:387

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