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How efficient is the European football betting market? Evidence from arbitrage and trading strategies
Author(s) -
Vlastakis Nikolaos,
Dotsis George,
Markellos Raphael N.
Publication year - 2009
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.1085
Subject(s) - arbitrage , profitability index , economics , football , trading strategy , odds , financial economics , statistical arbitrage , simple (philosophy) , econometrics , deregulation , competition (biology) , pairs trade , algorithmic trading , risk arbitrage , capital asset pricing model , computer science , finance , alternative trading system , arbitrage pricing theory , macroeconomics , ecology , philosophy , logistic regression , epistemology , machine learning , biology , political science , law
This paper assesses the international efficiency of the European football betting market by examining the forecastability of match outcomes on the basis of the information contained in different sets of online and fixed odds quoted by six major bookmakers. The paper also investigates the profitability of strategies based on: combined betting, simple heuristic rules, regression models and prediction encompassing. The empirical results show that combined betting across different bookmakers can lead to limited but highly profitable arbitrage opportunities. Simple trading rules and betting strategies based on forecast encompassing are found capable of also producing significant positive returns. Despite the deregulation, globalization and increased competition in the betting industry over recent years, the predictabilities and profits reported in this paper are not fully consistent with weak‐form market efficiency. Copyright © 2008 John Wiley & Sons, Ltd.