Research on betting markets presents mixed evidence regarding the existence of “safe bets,” with some studies identifying potentially profitable strategies while others emphasize market inefficiencies that tend to dissipate over time. The favorite-longshot bias, commonly observed in both financial and betting markets, suggests that riskier bets often yield lower returns, contradicting the notion that high-risk strategies can consistently generate profits (Moskowitz & Vasudevan, 2021; Franke, 2019). This bias underscores the challenge of achieving long-term gains in betting markets, as odds are typically set in ways that discourage risk-free profits.
Several studies have explored betting strategies that may offer positive returns under certain conditions. Betting on home wins using expert predictions has been suggested as a viable strategy, as expert assessments may incorporate information that is not fully reflected in market odds (Buraimo et al., 2013). Similarly, employing a Fibonacci sequence for draw bets has been investigated, with some evidence suggesting it could provide a structured approach to wagering (Archontakis & Osborne, 2007). However, the effectiveness of such strategies is often limited by increasing market efficiency, particularly in markets with high betting volumes where price adjustments are more frequent and accurate (Gramm & Rhodes College, 2005).
Hedging strategies have also been explored, with Zafiris (2016) proposing a multiple hedging approach to secure profits under specific conditions. Additionally, Gray & Gray (1997) found that some betting strategies could yield statistically significant profits, but these advantages often diminish as more bettors adopt them and bookmakers adjust pricing accordingly. Montone (2020) suggests that bookmakers’ risk attitudes influence pricing in ways that may create occasional arbitrage opportunities for informed investors, though such opportunities tend to be short-lived. Overall, while some strategies have shown short-term promise, the evolving nature of betting markets makes truly “safe bets” difficult to sustain over time.
Betting on home wins using expert predictions has been suggested as a viable strategy, as expert assessments may incorporate information that is not fully reflected in market odds
Summary of: Buraimo et al, 2013
Anecdote
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Articles Cited
- “N. Zafiris (2016): Is there such a thing as a safe bet, https://doi.org/10.5750/JGBE.V10I1.1159
- The paper presents a betting strategy that can secure a certain profit by taking advantage of changing odds and fluctuations in the probabilities of different possible outcomes of an event, as long as the outcomes are unambiguously defined and there is a reasonable expectation of a large amount of alternation in the relative prospects of at least two contenders.”
- “T. Moskowitz, K. Vasudevan (2021): What Can Betting Markets Tell Us About Investor Preferences and Beliefs? Implications for Low Risk Anomalies, https://doi.org/10.2139/SSRN.3845505
- The paper relates the low-risk anomaly in financial markets to the Favorite-Longshot Bias in betting markets, and finds that a model with reference-dependent preferences, featuring probability weighting and diminishing sensitivity, can explain the choice and amount to bet in both settings.”
- “Babatunde Buraimo, D. Peel, R. Simmons (2013): Systematic Positive Expected Returns in the UK Fixed Odds Betting Market: An Analysis of the Fink Tank Predictions, https://doi.org/10.3390/IJFS1040168
- The authors found evidence of semi-strong inefficiency in the UK fixed-odds football betting market, where betting on a reputable newspaper’s probabilities of match outcomes could have generated positive returns over multiple seasons, but that these potential arbitrage opportunities were not exploitable to a magnitude that posed a threat to bookmakers.”
- “P. Gray, Stephen Gray (1997): Testing market efficiency: Evidence from the NFL sports betting market, https://doi.org/10.1111/J.1540-6261.1997.TB01129.X
- The paper examines the efficiency of the NFL betting market using a probit model and finds that probit-based betting strategies can generate statistically significant profits, though with some inconsistency in out-of-sample predictions.”
- “Marshall K. Gramm, Rhodes College (2005): Betting Market Efficiency at Premiere Racetracks, –
- This paper empirically analyzes the favorite-longshot bias in betting markets at the two largest U.S. racetracks, Saratoga and Del Mar, finding that while inefficiencies exist, they are reduced as betting volume increases.”
- “F. Archontakis, E. Osborne (2007): Playing It Safe? A Fibonacci Strategy for Soccer Betting, https://doi.org/10.1177/1527002506286775
- The paper explores using a Fibonacci betting strategy to earn economic profits from betting on the draw outcome in soccer matches, specifically in the FIFA World Cup Finals, despite the fairly large risk involved.”
- “Max Franke (2019): Do Market Participants Misprice Lottery-Type Assets? Evidence from the European Soccer Betting Market, https://doi.org/10.2139/ssrn.2790850
- The paper examines whether market participants misprice lottery-type assets in the European soccer betting market, and finds evidence of a favorite-longshot bias in both the betting exchange and bookmaker markets, which is due to misperception of probabilities rather than risk-love.”
- “M. Montone (2020): Optimal Pricing in the Online Betting Market, https://doi.org/10.2139/ssrn.2199035
- The paper finds that the optimal pricing for risk-averse bookmakers in the online betting market depends on demand elasticity and the number of outcomes, and that shocks in order flow can create arbitrage opportunities for informed investors.”
Insufficient Detail?
At times it is difficult to answer the question as there are not enough relevant published journal articles to relate. It could be that the topic is niche, there’s a significant edge (and researchers prefer not to publish), there is no edge or simply no one has thought to investigate.
