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Testing Market Efficiency: Evidence From The NFL Sports Betting Market
Author(s) -
GRAY PHILIP K.,
GRAY STEPHEN F.
Publication year - 1997
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1997.tb01129.x
Subject(s) - ordinary least squares , sample (material) , econometrics , probit , ordered probit , probit model , economics , football , league , profitability index , multivariate probit model , statistics , mathematics , geography , finance , chemistry , physics , archaeology , chromatography , astronomy
This article examines the efficiency of the National Football League (NFL) betting market. The standard ordinary least squares (OLS) regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows us to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In‐sample tests indicate that probit‐based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out‐of‐sample testing, there is some inconsistency among the remaining out‐of‐sample predictions. Our results also suggest that widely documented inefficiencies in this market tend to dissipate over time.