2010-02-27 papers

on Sports and Economics

Issue of 2010–02–27
one paper chosen by
Humberto Barreto, DePauw University

Prices, Point Spreads and Profits: Evidence from the National Football League By Humphreys, Brad

Prices, Point Spreads and Profits: Evidence from the National Football League

By:	Humphreys, Brad (University of Alberta, Department of Economics)
Abstract:	Previous research on point spread betting assumed that bookmakers attract an equal volume of bets on either side of games in order to maximize profits. This paper examines the viability of this assumption from a theoretical and empirical perspective. The model of bookmaker behavior developed predicts that expected returns are not necessarily maximized when the volume of bets on each side of a game are equal. Analysis of a unique data set containing information on point spreads, game outcomes, and betting volume for the 2005-2008 NFL seasons reveals widespread imbalances in bet volumes. Simulations indicate that this imbalanced betting generated positive profits, including profits larger than would have been made if the betting volume was balanced on all games.
Keywords:	sports betting; balanced book model; NFL
JEL:	G11 G12 L83
Date:	2010–02–01
URL:	https://d.repec.org/n?u=RePEc:ris:albaec:2010_005

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