Some research shows that betting markets don’t always work perfectly, while other studies suggest they are usually efficient. For example, in baseball, a pattern called the favorite-longshot bias has been found. This means that underdogs are sometimes given lower chances than they actually have, which could create opportunities for sharp bettors (Woodland & Woodland, 1994). In the NFL, home teams might also be underestimated in point spreads, meaning they could be slightly undervalued in some cases (Shank, 2017).
In Greece’s fixed-odds betting market, researchers found that the way opening odds are set and how the market is structured can sometimes provide useful information that isn’t completely reflected in the final (closing) odds (Kalaitzakis et al., 2021). However, other studies have found that closing odds are usually more accurate than opening odds, meaning that as more people place bets and more information becomes available, the market adjusts and becomes smarter (Gandar et al., 2000; Gramm & McKinney, 2009).
Even though some inefficiencies exist, many researchers believe that these small differences aren’t enough to create consistently profitable betting strategies, especially once bookmaker fees (commissions) are considered (Woodland & Woodland, 1994; Kalaitzakis et al., 2021). In the end, how efficient a betting market is depends on several factors, like the sport, how the odds are set, and the time frame being studied. While inefficiencies can sometimes be found, they are usually small and hard to take advantage of before the market corrects itself.
Closing odds are usually more accurate than opening odds, meaning that as more people place bets and more information becomes available, the market adjusts and becomes smarter
Summary of: Gander Et Al 2000; Gramm & McKinney 2009
Anecdote
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Articles Cited
- “Alexandros Kalaitzakis, Petros Lois, Spyros Repousis (2021): Market efficiency and the Greek fixed-odds betting market, https://doi.org/10.1108/emjb-01-2021-0014
- The study examines the efficiency of the Greek fixed-odds (offline) betting market offered by OPAP from 2016-2019, finding that while the odds exhibit biases, this mispricing cannot be profitably exploited, but the opening odds, margin levels, and market structure provide information not fully captured by the closing odds, suggesting the market is not fully efficient.”
- “Corey A. Shank (2017): Is the NFL betting market still inefficient?, https://doi.org/10.2139/ssrn.3022567
- The NFL betting market, including both the point spread and totals markets, is statistically inefficient.”
- “L. Woodland, Bill M. Woodland (1994): Market Efficiency and the Favorite‐Longshot Bias: The Baseball Betting Market, https://doi.org/10.1111/J.1540-6261.1994.TB04429.X
- The paper examines the efficiency of the legal gambling market for major league baseball and finds a reverse favorite-longshot bias, but that this bias is not large enough to allow for profitable betting strategies when accounting for commissions.”
- “L. Woodland, Bill M. Woodland (1994): Market Efficiency and the Favorite-Longshot Bias: The Baseball, –
- The paper examines the efficiency of the legal gambling market for major league baseball, finding that the favorite-longshot bias exists in reverse for baseball bettors but that these deviations from efficiency are insufficient to allow for profitable betting strategies when commissions are considered.”
- “J. Gandar, Richard A. Zuber, W. Dare (2000): The Search for Informed Traders in the Totals Betting Market for National Basketball Association Games, https://doi.org/10.1177/152700250000100205
- The paper examines the betting market for total points scored in NBA games and finds that closing totals lines are more accurate forecasts than opening lines, and that line changes move the lines in the correct direction and magnitude to eliminate biases in opening lines, causing prices to more accurately reflect fundamental values.”
- “Ben Amoako-Adu, Harry S. Marmer, Joseph Yagil (1985): The efficiency of certain speculative markets and gambler behavior, https://doi.org/10.1016/0148-6195(85)90028-1
- The paper tests the efficiency of the football betting market and develops a model of the determinants of the closing spread, finding that the market is not perfectly efficient and that gamblers betting on long shots are acting rationally to maximize their returns.”
- “Marshall K. Gramm, Nicholas McKinney (2009): The effect of late money on betting market efficiency, https://doi.org/10.1080/13504850601018577
- The paper analyzes the effect of late bets on the efficiency of betting markets in horse racing, finding that late bets increase market efficiency and are the best predictor of true win, place, and show probabilities.”
- “Tim Kuypers (2000): Information and efficiency: an empirical study of a fixed odds betting market, https://doi.org/10.1080/00036840050151449
- The paper investigates the efficiency of the fixed odds betting market for football in England by testing how market participants utilize available information, and finds evidence of market inefficiency that could offer profitable betting opportunities.”
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.
